A Basic Guide to the Payment Systems Regulator (PSR)
WHAT IS THE PSR?
The Payment Systems Regulator (PSR) is the economic regulator of the UK’s payment systems. Experts across the fields of policy, compliance, communications, economics, project management, business operations and human resources, all work together to get the best outcomes for everyone using the payment systems.
WHAT IS A PAYMENT SYSTEM?
Every time someone uses as cash machine, transfers money, uses contactless or gets paid, they use a payment system. Just like a car needs a road to travel from A to B, a payment traveling from one account to another needs a system. A series of steps the funds must follow to leave one account and enter another, form that payment system. Each UK payment systems is designed for a specific purpose:
| Payment System | Purpose |
| The Faster Payment System (FPS) | Allows for real-time, fast and secure payments 24/7 |
| The Bacs Payment Scheme | Allows for the automated collection and distribution of funds such as salaries, bills and subscriptions |
| CHAPS | Deals with high-value, time-critical payments |
| Cheque & Credit (C&C) | Used for processing cheques and other forms of paper payment |
| Mastercard and Visa Europe | Connects issuers with merchants |
| Link Network | Enables users to withdraw cash and check balances at ATM cash machines |
WHAT IS THE PURPOSE OF THE PSR?
The purpose of the PSR is to ensure that these systems work efficiently and that they operate in the interests of all the people and the businesses that use them. To do this, the regulator, which was established in 2015, works to ensure that each system is reliable, secure and accessible at all times. In addition to this, they challenge the payments industry to adapt within the ever-evolving environment, by promoting competition and collaboration and by supporting innovation so that the UK can benefit from all the advantages of the world-leading payment systems while ensuring seamless and secure financial transactions for everyone.
WHO DOES THE PSR REGULATE?
The PSR currently regulates eight payment systems as follows:
| Bacs | CHAPS | Cheque & Credit | Faster Payment Service |
| LINK | Mastercard | Visa Europe | Sterling Finality Payment System |
These eight payment systems are designated by HM Treasury and the list is under constant review.
WHAT IS THE ROLE OF THE PSR WITHIN THE PAYMENTS INDUSTRY?
The PSR collaborates with the payment system operators and payment service providers it regulates, to enable existing payment systems to be enhanced and new payment systems to be developed. This means working closely alongside the Bank of England and the Financial Conduct Authority (FCA). They make sure that payment service providers have fair access to each payment system so that there is a wide range of options for people making payments, and that there is adequate protection in place should anything go wrong with a payment. All in all, the PSR plays a prominent role within the payments industry, making sure that its continuous evolution works for the benefit or everyone who depends on it.
DOES THE PSR HAVE RELATIONSHIPS WITH ANY OTHER REGULATORS?
Yes, the PSR collaborates with other regulators such as the Bank of England, the Financial Conduct Authority (FCA), the Competition & Markets Authority (CMA) and the Prudential Regulation Authority (PRA). In doing this, they aim to have a coordinated approach to regulating payments by avoiding duplication, ensuring consistency and by remaining considerate of the burden placed on those within the industry who are regularly required to provide information. The PSR also shares experiences and best practices with other sector regulators through networks such as the UK Regulators Network and the UK and European Competition Networks.
HOW DOES THE PSR SUPPORT INNOVATION?
In order to help move the industry forward, the PSR is continuously creating and using new ideas, technology and processes to improve the UK payment systems, with an aim of making them safter, faster and easier to use. This could be new ways to pay with your phone, more security for online payments or improvements to the speed in which money is transferred from one bank account to another. These improvements involve implementing new and improved services to existing systems as well as building entirely new ones.
Further innovation includes monitoring and tracking developments in the sector and working with stakeholders to not only identify new ideas, but also any potential barriers which they will then aim to address or remove. Innovation underpins the end goal of the PSR, which to make sure that everyone benefits from continuous seamless financial transactions.
HOW DOES THE PSR SUPPORT COMPETITION?
When companies within the payments industry compete, they strive to offer better and more efficient payment solutions to attract more customers. This competition is healthy; creating a more competitive marketplace leads to better services and lower prices for both consumers and businesses alike and is therefore highly encouraged and supported by the PSR.
To support such competition, the PSR focuses on creating the right conditions such as open banking. It issues both general and specific directions to ensure fair access to payment systems and to encourage competitive practices, such as providing information to help businesses switch service providers.
To oversee control of the competitiveness within the industry, the PSR has the power to enforce competition rules alongside the Competition and Markets Authority (CMA). This means the PSR can act against any company which tries to monopolise, cheat or stop fair competition among the UK payment services.
HOW DOES THE PSR WORK TOWARDS PREVENTING FRAUD?
The PSR works in different ways to prevent fraud. First and foremost, they set the rules and standards for payment systems to ensure that they are reliable and secure. It also works with other regulators to monitor and investigate suspicious activities. By promoting innovation and competition, they encourage the development of advanced security measures to protect both consumers and businesses from fraudulent activities. They also have the powers to act against companies that do not follow the rules, with the aim of maintaining a safe and trustworthy payment system environment for all.
One crucial area which the PSR is currently focusing heavily on, is Authorised Push Payment (APP) fraud. This type of scam is on a rapid increase and happens when someone is tricked into sending money to a fraudster posing as a genuine payee. To combat this, the PSR is instructing payment systems to take measures to prevent these scams and, as of 7th October this year, is implementing new legislations which will ensure that all Payment Service Providers reimburse customers who fall victim to such scams.