The Payment Systems Regulator’s new boss has admitted that he’s got a “big job” on his hands to oversee the renewal of virtually all the infrastructure underpinning the UK’s interbank payments.

Speaking at the Sibos conference in London, recently appointed managing director Chris Hemsley explained that a large part of this is the New Payments Architecture (NPA) which Pay.UK must deliver over the next few years.

“This has the potential to future-proof the UK’s payments landscape by delivering a resilient, robust architecture that supports innovation and greater competition in overlay services – overlay services that will benefit real people when they choose how to make their payments,” he stated.

“This is a big job, and a successful outcome depends upon bringing together a number of moving parts.”

Hemsley said that the NPA tender needs to be effective in terms of establishing a good design concept, with competition offering the potential to provide ideas about the best design and keep the overall cost down.

“We want to see a robust contract for delivery and operation of the infrastructure,” he stated. “This will need to support fair access to the systems and ensure that the company providing the infrastructure does not also enjoy an unfair advantage in other, related markets.

Hemsley said high quality governance arrangements must also be in place for the new payment system, allowing rules to be amended in light of experience and as the demands placed on the system change over time.

He also used his maiden speech in the new position to address the UK’s move towards being a cashless society.

According to the 2018 World Payments Report, the UK is one of the top 10 non-cash payment markets in the world.

“It may also seem a little odd that I am going to talk so much about cash at an event focused on digital payments, but one part of realising the opportunities of digital payments is ensuring that everyone benefits and we do not leave anyone behind,” Hemsley commented.

“The fact that cash use is in decline is not in question – 10 years ago, cash accounted for 60 per cent of all payments, today it is less than 30 per cent, and in 10 years forecasts suggest it will be below 10 per cent – this is a big shift.”

Ofcom currently estimates that around 12 per cent of adults in the UK suffer from ‘digital exclusion’, with PSR consumer research highlighting that nine per cent of survey respondents did not own a laptop, desktop, tablet or smartphone.

“So digital payments do not yet meet everyone’s needs,” said Hemsley. “This means cash still has an important role to play and our work needs to protect people who cannot or do not feel able to adopt digital payments.”

He reiterated the important of the Joint Authorities Cash Strategy Group, which brings together the PSR, the Financial Conduct Authority, the Bank of England and the Treasury to build on the existing collaboration across the regulators.

While cash use has reduced, 80 per cent of Brits still use it every week, and most of that cash gets into the hands of consumers from an ATM, with free-to-use machines very much the preferred means.

“The immediate challenge here - as the decline in cash usage puts pressure on ATM providers - is protecting the geographic spread of free-to-use ATMs so consumers can continue to access the cash they need and want in ways they find convenient,” said Hemsley.

“This is why we used our powers to ensure LINK met its commitment to protect the geographic spread of free-to-use ATMs,” he continued, adding that the PSR will continue to closely monitor how this is working on the ground.

“But we are very conscious that this is a short term measure, it can’t be an enduring solution, not least because it’s static and doesn’t take into account how the needs of consumers and local communities for access to cash may change over time, particularly as cash usage continues to decline.”

Hemsley explained that this is why the PSR prompted discussions on whether there should be reforms to the LINK interchange fee structure and are keen to explore how community needs can be reflected in decisions on where ATMs are located.

LINK has announced a pilot scheme that involves installing ATMs in response to community requests via local MPs, and UK Finance has committed to developing an approach to help communities identify and report gaps in cash provision.

“But we need this to go further,” he commented, adding: “There is a very real opportunity here to build a comprehensive community engagement scheme that would apply throughout the UK and would allow local communities to raise problems with access to cash.”

The answer cannot be that ATMs should be installed everywhere, Hemsley pointed out, but the impacts of not having access to cash are worse in areas of social deprivation, in remote towns and where digital payments do not work well.

“Looking ahead, we have a stakeholder roundtable event next month where we will be discussing more about consumer outcomes, community engagement and how we can make access to cash via routes other than ATMs more acceptable to consumers.”

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