What has happened?
The UK Financial Conduct Authority (FCA) is developing a new strategy to help it identify emerging trends that could cause harm to the payments sector in the future.
What does this mean?
The initial outline for the strategy comes in the FCA's Business Plan, which explains the watchdog's priorities in financial services regulation for the next 12 months.
The Plan says the new strategy will see it:
- undertake diagnostic work on payment fraud, including Advanced Push Payment Fraud, to develop appropriate interventions as well as support industry initiatives;
- use evidence sent to the Payments Systems Regulator by the consumer group Which? to help inform its work.
The FCA also notes the Bank of England has committed to opening up direct access to its Real-Time Gross Settlement (RTGS) system to non-bank Payment Service Providers.
"This will give electronic money institutions and payment institutions direct access to payment scheme," the Business Plan says. "We are strengthening our supervision of all applicants to support this initiative which will help improve competition and innovation in payments."
It is difficult to know what form the strategy will take and what firms might have to do in response. However, a recent speech by Karina McTeague, Director of Retail Banking Supervision at the FCA, is instructive.
In it, she said that in response to changes in the payments landscape "our supervisors will be looking to see that firms’ culture prioritises treating customers fairly, and doesn’t take inappropriate advantage of ill-informed, naïve or vulnerable consumers."
She also noted that the watchdog would seek to establish that "firms have sound systems and controls for effectively managing financial risks, such as safeguarding, and operational resilience," as well as "combatting the risk that they are used for financial crime and money laundering purposes".
"We will want to know that firms help their customers understand the account information and payment initiation services on offer, what the services are, what it is they’re consenting to."
The FCA will also be keeping a close eye on what will happen to the customers' personal and account data, where it will be shared, with whom and for what purpose, she added.
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