Leave the Payments Council Alone
My title for this month’s article might have been entitled “Bashing Bankers, Part 4 – Government”. It concerns what is, in my opinion, a particularly ill-considered and unjustified attack by the government on the UK payments industry as a whole and in particular the Payments Council.
In July this year HM Treasury issued a consultation document entitled “Setting the Strategy for UK Payments”, criticising the Payments Council and proposing that its powers be passed to a new Payments Strategy Board which in turn reports to the new Financial Conduct Authority. The intention is to make the UK payments industry “more responsive to the needs of users” and less subject to the “unfettered power” of the banks, by bringing the Council formally within the system of government regulation.
My response to the consultation document is that the Payments Council is a highly professional and effective organisation and that government should leave it alone. The proposals in the consultation paper are complex, costly, and unnecessary and by the law of unintended consequences will, I believe, be to the detriment of the UK payments industry if implemented.
It seems extraordinary to me that the government should choose to attack the Payments Council at this time. Over the past several years almost every part of the banking industry has been revealed to be incompetent, untrustworthy, greedy and criminally negligent. By comparison, the UK payments industry stands as a beacon of integrity, reliability and value for money. As a payments systems consultant my considered opinion is that the UK payments industry is one of the best, if not the best in the world and that this is in large part thanks to the stewardship of its governing body. As a consumer, I enjoy access to a wide range of payments options which in my experience are 100% reliable and are delivered completely free. What’s the problem?
The consultation paper makes much of the Council’s supposed failure over phasing out cheques. This is grossly unfair. Anyone with any knowledge of payments at all knows that cheques are inefficient, expensive, insecure and obsolete. After a long period of detailed analysis the Council sensibly announced a plan for cheque withdrawal by 2018. Not surprisingly, this was greeted with howls of protest by various consumer pressure groups. At this point, rather than showing some guts and backing the strategy, the government demonstrated the worst sort of populism by caving in to media pressure and forcing the Council to reverse its decision. This I find shameful.
Another misleading theme in the paper is that the Council should not have planned for cheque withdrawal without some sort of alternative payment vehicle in place, implying that the UK payments industry has in some sense failed to innovate or develop new payments technologies. In fact, nothing could be further from the truth. Through cashless shopping, EMV chip, online banking, and now Faster Payments the UK has led the world for two decades. Faster Payments, in particular, was developed by the Payments Council in record time and has as yet no equivalent anywhere in the world, allowing anyone with an online bank account to transfer funds in a matter of minutes. This new infrastructure will undoubtedly support alternative payment vehicles acceptable to even the most recalcitrant consumers well before 2018.
Arguably, government is as much to blame for the current financial crisis as any other party. So stop trying to fix what ain’t broke and leave the Payments Council alone.
Nick Collin, Banking Automation Bulletin, November 2012