However, the regulatory landscape has evolved and while compliance remains a primary

Can you turn regulatory and payment scheme compliance into a competitive advantage?

focus, there is now an opportunity to gain a larger foothold in the payments value chain and seize a competitive advantage – writes Jamie Merritt, Partner, Accourt – Payments Specialists.

Historically, the ability to become principal members of the payment schemes has primarily been the domain of the traditional bank players. However, as a result of the Payment Services Directive (PSD) and its driving desire to create a broader competitive landscape, opportunities now exist for smaller, more agile organisations and those with bespoke niche propositions to operate in a space usually occupied by the traditional banks. For example, prepaid issuers and PSPs have been able to apply to the FCA for Payment Institution Licences (PI’s) or E-money Licences and principal membership of the Schemes, dispensing with the need for a traditional banking partner.

The rationale and potential barriers to enter into this space have been both commercial and regulatory, as access requires both principal membership of the payment schemes and a licence from the FCA. Whilst these remain unchanged, the opportunity to gain a stronger foothold in the payments value chain – and ultimately a greater share of the revenue pool – is worth consideration.

Traditional issuing and acquiring models have focused on a number of key players taking clearly defined roles.  Both prepaid issuers and acquirer PSPs have changed the landscape here, with additional organisations fulfilling both key operational/regulatory roles whilst providing additional value to the end customer. Consequently, there are a number of points to consider, namely:

1. The regulators and the European Commission are striving towards both greater competition and transparency on the various fee structures
2. With greater transparency, the quest for value provision to the consumer is paramount
3. An increase in the number of constituent parts of the payments value chain, whether from an issuing or acquiring perspective, will ultimately result in increased pricing for the end customer.

Therefore, organisations participating in this space – or those that have an appetite to do so – must have the ability to positively address these points. The key question is: how?

Fundamentally, they need a clear and full understanding of the implications associated with both the Regulator and scheme membership and/or accreditation. These implications fall into three broad categories:

1. Commercial – How can you build a business case that factors in both incremental revenues and the costs associated with regulator and payment scheme approval and on-going management of the business?
2. Operational – What infrastructure changes do you need to make to your business to demonstrate an understanding of, and compliance with, both the application and day-to-day management of the regulatory and scheme requirements?
3. Compliance – How can you demonstrate that the written policy and procedural documents are a living, breathing part of the company’s DNA?

It is also imperative to evaluate how responses to these questions will be viewed by a regulator. The FCA has summarised its role as four key functions:

• Regulation – A supervisory role of the overall conduct of regulated companies
• Best Practice – Upholding the highest operational and ethical standards
• Protection – Ensuring customer protection
• Enforcement -Taking the required punitive action against organisations who fail to meet these standards

The FCA’s overall objective is to drive better consumer protection, greater integrity of the payments system and enhanced customer experience by increasing competition. Consequently you will need to demonstrate regulatory compliance in line with all the JMLSG guidelines and all legal requirements through both the application phase and on-going management of the day to day business.

A similar level of due diligence is also required to support principal membership applications with the individual payment schemes, either as an acquirer or an issuer. The development of the supporting business case is key, both from the perspective of potential collateral requirements and in demonstrating a comprehensive understanding of the compliance obligations and fee structures.

Once you understand the rationale to embark on this journey you will need to work through how to best achieve the desired result.  The reality here is that this is extremely difficult to do well.  A critical factor is the selection of the right partner to assist you with the development of this road map and to help navigate through this extremely complex commercial and regulatory maze.

How Accourt can help:

• Assist in the development of the requisite supporting business case
• Develop a risk assessment and gap analysis on the supporting operational infrastructure
• Review and/or create supporting operational procedural documentation, including all the required regulatory and compliance documents
• Support and manage the application process to the regulator and provide all subject matter expertise
• Create supporting documentation for principal scheme membership
• Manage the application process
• Provide subject matter expertise and provide support for the scheme risk review
• Provide subject matter expertise and provide support for the go-live project

The post Can you turn regulatory and payment scheme compliance into a competitive advantage? appeared first on Accourt Payments Specialists.

The PSR’s aim is to make payment systems work well for the people and organisations

that use them, and deliver greater choice, innovation and competition – according to Leaprate.com.

Payment systems let people pay a deposit on a house, withdraw money from a cash machine, transfer money via smartphone, receive salaries into bank accounts, and much more. They are vital to the UK’s financial system and process in the region of 21 billion transactions worth around £75 trillion a year.

“Today marks a new start for payment systems. Our approach will bring change to the industry, injecting competition and innovation where it is needed most, and will put the interests of the people and businesses that use payment systems front and centre,” comments Hannah Nixon, managing director of the Payment Systems Regulator.

“True, long lasting change will be difficult, but we have the powers and the people to make it happen. Our challenge now – the challenge we share with industry – is to work together to deliver it.”

Today’s publication confirms the three ‘pillars’ of the new PSR’s work:

•  A new and inclusive strategy setting process that really involves users of these systems for the first time. This will be done by setting up a Payments Strategy Forum to develop a long term vision for how payment systems should develop and identify priority areas for the industry to work together where appropriate to deliver this vision;
•  Increasing transparency around how decisions are made, and who is making them. We will shine a light on the control and governance of payment systems, challenge payment system operators to explain how they have listened to people and organisations that use payment systems, and check that operators are really taking payment systems in a direction that meets people’s needs; and
• Improving the way people and businesses gain access to a payment system – whether directly or indirectly – to be clearer and fairer and in a way that fosters innovative and competitive solutions for customers using payment systems.

As well as confirming its final policy, the PSR has published draft terms of reference for two market reviews and announced a card payment systems programme of work. The two market reviews will look at ownership and competitiveness of infrastructure provision; and the supply of indirect access to payment systems. This work will help the PSR gather important evidence to help it make robust decisions that make a real difference to those who use payment systems.

The PSR’s agenda complements work by the Financial Conduct Authority and the Competition and Markets Authority to deliver a more competitive banking industry in the best interests of consumers and the economy.

The new watchdog, whose upcoming launch was first announced in the spring of 2014, has been putting the final touches to its organization before the official start of operations. In January 2015, the regulator added three senior executives – Carole Begent, Mark Falcon and Louise Buckley to its ranks.

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