The Bank of England will be tracked on its progress on UK payments regulation after it was handed a new objective by ministers.
The central bank will be given a new secondary objective to support innovation in payment systems and new forms of digital currencies alongside its main goals of financial stability.
The Treasury is set to implement the changes through amendments to the Financial Services and Markets Bill, which heads to the House of Lords for scrutiny in September. The Bank will report against the objective annually.
City Minister Lucy Rigby said: “Whilst financial stability will always remain the Bank’s primary objective, this secondary objective will support the Bank to continue to drive innovation in payments and digital finance, ensuring that the UK remains a global leader in financial services.”
Labour came to power promising an overhaul of the payments sector with updated regulation to support innovation. Former Chancellor Rachel Reeves unveiled her National Payments Vision (NPV) in her 2024 Mansion House address where she said the plan would include “decisive action to progress opening banking and support our fintech businesses”.
But thus far, progress has remained sluggish and has faced criticism for shaping up to be more of a “reshuffle than a reform”.
Payments overhaul faces criticism for progress
The Payments Association – which serves as the industry body for the payment sector – last year sounded the alarm on the relationship with the FCA and Bank of England and called for the government to ensure the bank has veto rights over the City watchdog.
Last March, Labour axed the Payment Systems Regulator (PSR), which was regulated into existence in 2013, as part of its bid to drive growth.
In a Treasury Committee hearing earlier this year David Geale, managing director at the Payment Systems Regulator (PSR), said the abolition of the body would not formally come to fruition until the first quarter of 2027 at the earliest.
When questioned on whether there had been any “practical difference” since the announcement the PSR would be consolidated into the Financial Conduct Authority, Geale said “[staff] were largely doing the same thing”.
“I would anticipate as we consolidate further into the FCA there will be some efficiencies,” Geale told lawmakers.
The PSR chief said there had been some efficiencies achieved already through not replacing senior colleagues who had departed the regulator. He added the Budget the PSR had for the year was £28m, which it expects to come “reasonably under”.
At the City and Financial Global’s Payments Regulation and Innovation Summit in February, chair Natalie Lewis, who serve as head of payments at Travers Smith, applauded recent regulatory progress but said the industry was still “waiting for the coin to drop”.
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