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The Payments Association’s Project Regulator working group, led by Alison Donnelly of fscom, will continue to engage with the FCA in 2023 to ensure members can thrive in the UK payments market.
Over the course of 2022, the project produced a whitepaper on a post-Brexit regulatory landscape to inform policymakers of the industry’s perspectives, represented the sector in consultation responses on buy now, pay later proposals, educated The Payments Association’s members on the Financial Conduct Authority’s (FCA’s) Consumer Duty rules, and informed regulators on how guidance should be designed to support the industry’s needs.
Notable achievements of 2022
- Future of Payments Regulation (Whitepaper – April)
- BNPL Regulation (Consultation Response – June)
- FCA workshop on authorisations (July)
- Embedding the Consumer Duty (Whitepaper – September)
- Embedding the new consumer duty requirements in your product development (Webinar – September)
“Project Regulator gives members the opportunity to be at the cutting edge of regulatory change affecting the sector,” says Max Savoie, partner at Sidley Austin and member of Project Regulator.
“I have been continually impressed by the knowledge, intellect and pragmatism of the group, including through discussions with the Financial Conduct Authority, involvement in regulatory consultations, and sharing updates on regulatory developments and their impacts, which includes representation from a broad range of firms and advisers. It helps that they are also a very amiable and welcoming bunch,” he adds.
The post-Brexit landscape
Working with the industry, UK Finance and law firm Latham & Watkins, the project produced a whitepaper to assess and inform the post-Brexit regulatory landscape for the sector in April 2022.
The whitepaper, called ‘UK Payments Regulation Review: Making sense of where to go now’, highlighted the rapidly developing innovation in the financial services market, from digital assets to wearables, examined the existing regulatory structure in the UK and its ability to regulate the expanding number of market participants, more innovative products and services and changing risk profiles.
What to watch in 2023
- UK regulatory approach to cryptoassets
- Lobbying the FCA on processing firms’ applications to be registered
- UK divergence from EU regulations on operational resilience and CSDR
- FCA oversight on Consumer Duty implementation
The report identified opportunities for the three main regulators in the UK (Bank of England, FCA, and the Payments Systems Regulator) to explore opportunities to proactively engage with market participants, enable more coordination on implementation requirements and timelines, as well as the UK’s regulatory divergence from the EU.
Since its release, the three regulators have made it clear that they will be making more of an effort to collaborate with trade bodies like The Payments Association and other industry forums to discuss their intentions and proposals for regulatory policy. However, more still needs to be done. Industry participants are still concerned by the lack of a regulatory roadmap from the FCA and want to see all regulators be more open about their plans.
Regulating BNPL
One of the most talked about topics of 2022 was buy now, pay later (BNPL). The popular lending products have caught the attention of UK regulators and have been debated at length over whether they should be regulated or not and whether this would disrupt innovation in the sector.
For Project Regulator, the concerns were about the lack of consumer protections offered by BNPL products and that the government could implement a potentially disproportionate approach to regulating the market.
Therefore, the project team supported The Payments Association’s response to Treasury’s consultation on the ‘Regulation of Buy-Now Pay-Later’, highlighting its main concerns.
However, beyond consultation responses, the sector spent most of the year engaging the FCA on its regulatory policy.
Specifically, the project team wanted more dialogue with the FCA over its authorisation processes ns raised by members of The Payments Association that the FCA’s processing times were not being met.
The project members hosted a meeting with the FCA’s authorisations team, who shared that they were receiving 9,000 from firms each year to become regulated and only 12% of applications were being approved. The project team provided recommendations on how to improve the relevant guidance on the FCA website. Project Regulator lead Alison Donnelly also interviewed the FCA’s Head of Authorisations Val Smith to provide an update to the wider membership.
In 2023, the project team will be speaking with the FCA to see how things have improved following the final applications in 2022 from the Temporary Permissions Regime (TPR) firms.
Consumer Duty rules at the forefront of Q3
The FCA’s rules, announced in July 2022, were a notable regulatory change for the sector, requiring clarification, education and guidance on how to comply.
The Project Regulator team recognised the lack of clarity in its scope and that The Payments Association’s members and wider industry were confused about how to implement the changes. Therefore, the team created a fully-fledged content programme on the topic.
The project educated members on how they could embed the duty in their business models. They spoke to members in an open mic session, drafted a NatWest. The report was warmly received by over 150 members and 400 people from member companies and the wider industry attended the webinar.
As the year ends, the project is preparing to embark on the next regulatory and compliance challenges the industry will face. There will be coverage of the various bills awaiting parliamentary approval, the proposals to address the competitive impacts of Big Tech firms entering the financial services market, digital currencies, and other industry disruptors, as well as a collective effort to make sure regulators listen and respond to the industry’s views.