Since the beginning of the financial crisis there has been real appetite for reform into how our financial sector works and how we want it to operate. The Liberal Democrats have played an important part in this, both from within Government as well as from the backbenches.
During its time in office, the Coalition has already introduced a Financial Services Act into law and is currently legislating for a Banking Reform Bill. In addition, there is also the ongoing Parliamentary Commission on Banking Standards, which I appeared in front of in late January.
Not only is Danny Alexander ensuring the Party’s view is heard from within the Treasury, but two Liberal Democrats – John Thurso and Susan Kramer – have played prominent roles on the Parliamentary Commission on Banking Standards. Baroness Kramer has particularly been vocal on the need to increase consumer choice in the system, which we fully support.
If we are to truly reform our banking sector, then I would welcome any new measures that help deliver choice and competition. We need an industry that offers customers better products and services.
The recent announcement by the Treasury to open a consultation into introducing new regulation focused on the payments system offers the possibility of enhanced competition, but also the risk of delaying important change in payments.
The Chancellor, George Osborne, spoke in early February calling for banks to work for their customers and not the other way around. He spoke of the need for a:
payments system that was at the heart of the banking sector and one that worked for both consumers and businesses.
These statements are all things I agree with; more competition on the high street and payment systems that help to serve the people and businesses that use them.
Yet, many of the reforms the Chancellor and Government are advocating are already taking place.
The Payments Council is already listening to politicians, consumers, businesses and charities, as well as to the incumbents, challengers and new national entrants to the banking market that are so central to this debate. Working with Government, we are developing a clear strategy for the next ten years that will ensure that UK payment services continue to be both cutting edge and world-leading.
As one of the biggest customers and users of our payments systems, it makes sense that Government and other customer groups should all have their voice heard when shaping future innovation. The Payments Council is uniquely placed to make sure these critical conversations happen.
In 2008, we introduced the Faster Payments Service that allows consumers to move money almost instantly. This September, thanks to a Payments Council-led project, customers will be able to switch their bank account hassle-free in just seven working days and, in the spring of 2014, we are introducing a new mobile payments service to allows people to transfer money securely just by using a mobile phone number. These innovations are largely unmatched anywhere else in the world and will help consumers and businesses move money around the economy more quickly.
More importantly, the changes that our new account switching service will deliver have the potential to transform the retail banking landscape in this country. It should provide an attractive platform that new entrants and existing players can use to compete for customers and so deliver greater competition and choice.
We are the only organisation undertaking research across a variety of industries and stakeholders, to understand the unique needs of particular groups of customers and businesses, and using this evidence to drive change. It is vitally important that any reforms do not negatively impact unseen aspects of our work. A regulator is unlikely to be able to deliver our important customer focused work such as raising awareness of chip and pin for the elderly or delivering dual electronic signature options for charities, small clubs and societies.
This issue may appear on the edge of the wider reforms, but for consumers it is important. We need a system that allows more competition and choice within the market, something the Liberal Democrats hold dear. To implement a system that could harm the on-going reforms and strategy setting we are undertaking would simply be wrong for the Government and, ultimately, the country.
‘The Independent View‘ is a slot on Lib Dem Voice which allows those from beyond the party to contribute to debates we believe are of interest to LDV’s readers. Please email [email protected] if you are interested in contributing.
* Adrian Kamellard is the Chief Executive of the Payments Council
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4 Comments
Maybe the Payments Council should examine the fees charged by the banks for inter-bank transfers to/from the UK and the rest of the EU?
For transfers within the Eurozone, banks must charge the same fee for an inter-Eurozone transfer as for a domestic transfer (I.e. “free” domestic bank transfer cost means “free” bank transfer between Eurozone member states). This has massively reduce the cost of such bank transfers (for transfers using IBAN + BIC).
Other non-Eurozone member states, such as Sweden, have copied this mandated approach for inter-EU transfers but not alas the UK where even today one high street bank quotes a cost of £25 to transfer £100 within the EU.
No doubt the banks have a good explanation why using the exact same banking transfer systems as is used everywhere else in the EU, the UK consumer ends up paying multiples of the cost that consumers elsewhere in the EU pay, right?
Adrian,
“More importantly, the changes that our new account switching service will deliver have the potential to transform the retail banking landscape in this country. It should provide an attractive platform that new entrants and existing players can use to compete for customers and so deliver greater competition and choice.”
Are these changes expected to include portable bank account numbers akin to the mobile phone industry?
Hi Joe ,
The simple answer is no, but based on our continuing research with customers, I would challenge whether it is required. I believe that our new service should be launched and then judged on the difference it makes. Without doubt our new service will greatly improve the account switching experience for customers, and it will do it later this year. We are confident from independent research amongst customers, businesses and charity/voluntary organisations that what all these parties are calling for is a switching process that provides a safe, reliable and guaranteed means of switching their bank account: it’s of little importance to them how this is achieved. The Independent Commission on Banking has recommended that the service is assessed in 2015 to consider what further action is taken.
This does not mean we are ruling out account portability but its merits need to be properly assessed against the challenge of delivering it, and in the context of a much wider review of how the UK payments infrastructure will need to change to meet lots of different potential requirements. Full account portability would require a completely new centralised system, which would necessitate the replacement of the bank and branch system of numbers, it would potentially require every customer to have new bank account details – even those not switching.
This debate is being carried forward by the Payments Council as part of much broader strategic review of how the critical payments infrastructure should be developed to deliver additional innovation, competition, integrity and stability. We are considering several options that might include: ring fencing; account number portability; account portability; the use of proxies such as telephone numbers or email addresses; and a central payments single utility. We need to fully assess the benefits and the risks of all these options. We need to understand what changes would be required and their effects on other areas such as competition. It must start from what customers and the economy needs, and it must lead to evidence-based investments in the infrastructure to support those needs and to achieve this we are developing a Payments Roadmap. The first version of this will be published this year and it will give government, consumers, businesses, charities and voluntary groups a number of potential scenarios for them to consider and consult us on.
Interestingly, we are also introducing a new mobile payments service next year that will enable customers to make a payment to another person using only their mobile number instead of account details, and this will give customers a simple proxy that can be used in place of their account number and sort code to send and receive money to and from their account.
Hi Paul,
Thanks for your response. Actually the UK does comply with the EU Regulations on cross-border payments. Under Regulation 924, which relates to euro payments, a payment service provider must charge no more for making a cross-border payment in euros than they would for a corresponding national euro transaction. In the UK because the domestic clearing system is for sterling, not euro, customers will be charged for making ‘national’ euro transactions (i.e. transactions in euro between two accounts based in the UK) and therefore the same amount for a cross-border euro payment.
You cite the example of Sweden, which like us has its own currency, but the difference is that their government made the decision to opt-in to Regulation 924. In the UK HM Treasury decided not to opt-in.
The actual costs charged by Payment Service Providers for making a euro payment is entirely a competitive issue – and so outside the Payments Council’s remit. However, because it can pay for customers to shop around and choose between different payment options we have published information to help customers compare and make the right choices: http://www.payyourway.org.uk/resources/guides/guide-to-international-payments/.
In recognition of the fact that cross border payments are becoming more important for businesses and individuals, the Payments Council would like to review cross border services available to customers but when it comes to a price review clearly it would be only appropriate for a regulator to look at this.
I appreciate this is a complex issue and if you would like to find out more please do get in contact via [email protected].