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Mobile payment schemes should escape regulatory oversight for now, UK government proposes

Out-Law News | 15 Oct 2014 | 11:53 am | 2 min. read

Mobile payment schemes will not be subject to the new UK regulatory framework for payment systems that is due to begin operation in spring next year, under plans unveiled by the Treasury.

The Treasury has launched a consultation on its plans for a number of payment systems to be regulated by the Payment Systems Regulator (PSR). From April 2015, the PSR will be tasked with promoting effective competition and innovation in payment systems and ensuring that those systems are operated and developed in the interest of business and consumer users of those systems.

The PSR will only be responsible for regulating payment systems that are designated for regulation by the Treasury. The Treasury has now proposed that eight payment systems in operation in the UK should be subject to the new regulatory regime. Those payment systems are Bacs, CHAPS, Faster Payments, LINK, Cheque and Credit, Northern Ireland Clearing, Visa and MasterCard.

No solely mobile payment system has been designated for regulation by the PSR by the Treasury.

"There is nothing surprising about those included on the payment systems that the Treasury has listed for regulation by the new PSR," technology and payments law expert Angus McFadyen of Pinsent Masons, the law firm behind Out-Law.com, said. "What is interesting is the part of the Treasury's consultation that outlines the other 'systems' that it is not initially intending to designate for regulation."

"Although the Treasury states that those on that list, which include mobile payment services such as Paym and Google Wallet, are not to be regulated at this time, the Treasury has suggested that they could be in future," McFadyen said. "This indicates that what the Treasury considers to be a payment system is broader than might have been expected and shows the potentially wide range of activity that the PSR could be asked to provide regulatory oversight of in future."

In its consultation paper, the Treasury said that it considers Paym, Zapp, M-Pesa or Google Wallet to each be payment systems in their own right.

However, it said that they are "currently too small or are not operational in the UK" and so should not be regulated by the PSR at this time. However, it said if those payment systems were launched and/or "became important enough" then it could at that stage bring them within "the scope of regulation by the PSR".

In August, the UK Payments Council told Out-Law.com that it expected the Treasury to designate the Paym mobile payment service for regulation by the PSR.

The Treasury said that it also considered whether to designate the American Express and PayPal payment systems for regulation by the PSR but said it "does not currently consider that there is sufficient evidence to justify designating these systems at this point".

From April 2015, the PSR will have a number of powers available to it to influence how payment systems operate. The PSR will also be able to order payment system operators to allow rival companies access to their payment systems, among other powers that will be at its disposal.

Earlier this month, Hannah Nixon, managing director of the new PSR, outlined what the new regulator wants to see payment system operators deliver under the new regulatory framework.