Payments regulatory news, February 2021 # 2

Hogan Lovells

Hogan Lovells

Recent regulatory developments focussed on the payments sector. See also our General Regulatory News of broad relevance in the Related Materials links.


  • New Payments Architecture: PSR CP21/2
  • APP scams: PSR call for views
  • Consumer protection in interbank payments: PSR call for views
  • Consumer Research 2020: PSR summary report

New Payments Architecture: PSR CP21/2

The UK Payment Systems Regulator (PSR) has published a consultation paper, CP21/2, on the options for reducing risks to the successful delivery of the New Payments Architecture (NPA). It has also published responses to its January 2020 call for input on competition and innovation in the NPA.

The PSR is concerned that, currently, there are unacceptably high risks that the NPA programme will not provide value for money and could delay or prevent the benefits to competition and innovation in payment services it wants the NPA to deliver. It is also mindful of the need to manage potential risks of disruption to payments during the migration of Bacs and Faster Payments transactions to the NPA.

As a result of these concerns, the PSR is seeking views on narrowing the scope of the initial contract for delivery of those NPA services that will provide an enhanced immediate payments service and enable Faster Payments transactions to move to the NPA. It is also seeking views on the appropriate way to secure this contract. In addition, the PSR is consulting on reducing risks to competition and innovation in the NPA.

Following this consultation, the decisions the PSR makes will have implications for the PSR's Specific Directions (SDs) 2 and 3. These require Pay.UK to run a competitive procurement for the central infrastructure for Bacs and Faster Payments respectively. In the light of its conclusions, the PSR will consider whether the directions should be varied, revoked or replaced.

Comments on the proposals for reducing risks to the delivery of the NPA can be made until 19 March 2021. Comments on the proposals relating to competition and pricing can be made until 5 May 2021.

APP scams: PSR call for views

The PSR has published a call for views, CP21/3, focussing on authorised push payment (APP) scams.

The PSR explains that, although the Contingent Reimbursement Model (CRM) Code has improved consumer outcomes, its application has not led to the significant reduction in APP fraud losses incurred by customers that is needed. Customers are still bearing a high proportion of losses, despite the default requirement in the Code that customers should be reimbursed where they have acted appropriately.

The PSR proposes three measures which, applied individually or in combination, could help by both reducing APP fraud and, when it happens, improving protection for victims. The measures, which would apply to payments made through the Faster Payments Service and Bacs Direct Credit, are:

  • improving transparency on outcomes, by requiring payment service providers (PSPs) to publish their APP fraud, reimbursement and repatriation levels;
  • greater collaboration to share information about suspect transactions, by requiring PSPs to adopt a standardised approach to risk-rating transactions and sharing risk scores with other PSPs involved in a transaction; and
  • introducing mandatory protection of customers, by changing payment system rules so that all PSPs are required to reimburse victims of APP fraud who have acted appropriately.

Responses can be submitted on the call for views until 8 April 2021. The PSR plans to publish a follow-up paper to CP21/3 between July and September 2021.

Consumer protection in interbank payments: PSR call for views

The PSR has published a call for views, CP21/4, focussing on consumer protection in interbank payments. In particular, the PSR considers the levels of protection available to consumers when they make payments from their bank account directly to another bank account using an interbank payment method (particularly the Faster Payments Service).

The PSR explains that more people are transferring money using smartphone apps or online banking. As more transfers are made in this way, the PSR is keen to understand whether the protections currently in place are sufficient. The PSR is exploring how it, and the industry, can ensure that consumers and businesses are not disproportionately harmed when something goes wrong with their interbank payment (including faults with goods or services purchased). The PSR is considering measures that make it easier for consumers to make a claim when something goes wrong, as well as measures that benefit businesses by providing certainty about what happens when a payment is disputed.

Responses can be made to the call for views until 8 April 2021. The PSR will set out proposed next steps following CP21/4 later in the year.

Consumer Research 2020: PSR summary report

The PSR has published a summary report on consumer research conducted in 2020. The PSR previously commissioned an independent research company to conduct a two stage programme of qualitative and quantitative research with consumers. The summary reports on the second wave of this research, which was first conducted in 2017. Fieldwork was conducted earlier in the year than anticipated to capture "in the moment" behaviours as a result of the COVID-19 pandemic.

Overall and in the context of COVID-19, the research looked to:

  • understand consumer awareness of payment systems;
  • explore consumer expectations and perceptions around payments;
  • explore consumers' needs in relation to payments;
  • understand any challenges consumers face around payments; and
  • identify what consumers expect from the future payments landscape.

The report sets out a high-level summary of the research findings and implications.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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