Saddling up the hobby horse again
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11 October 2013Gareth Lodge
Wednesday saw the Government announce ) its plans to overhaul UK payments. Regular readers of the Celent blog will know I’ve commented on this several times - here, here, and here. In short, the Government asked the industry, in a poorly formulated consultation, whether it wanted to be regulated or not; unsurprisingly, the industry said no. The Government then launched a second consultation, and asked the industry whether a) it wanted to be regulated or b) whether it wanted to be regulated. As one response said “….we believe the aims of Government in the current consultation are weakly defined, naive and rather generic.” And that from a non-bank and who would potentially benefit from the changes! It came as no surprise then that the Wednesday that the Government has chosen to regulate the industry. Coverage in the press has been less than helpful. One small bank was quoted in The Times as saying that they had to pay 40p for a Faster Payments whilst the big banks got them for free, and that was symptomatic of the issue. Indeed, that comment is symptomatic, being incorrect, illogical and unhelpful. The big banks do pay for every transaction, also paid large amounts of money (>£200m) collectively to create the system, and the small bank would be most welcome to join the scheme, and pay lower transaction fees (albeit accompanied by large running costs for the system!) Previously, I challenged the Treasury to come up with some clear objectives, with transparent ways of measuring success in achieving those objectives. These still don’t exist – indeed, in the release they use a bizarre example from Sweden which isn’t even successful in Sweden as justification. I think therefore we need to start from even further back. Firstly, let’s get our facts right. Get an independent auditor to level set the assumptions and data they’ll be building from. Secondly, let’s be clear of the purpose. Much of what the regulator is proposing will have no positive effect for the consumer, and likely a negative one, as ultimately someone has to pay for these changes, and it’ll be customers. Thirdly, use the correct analogy. A utilities regulator assumes it’s a utility, but payments isn’t and never has been. The payment system is a private enterprise, run by a group of banks, for a group of banks. Could we imagine the local corner shop trying to force Tesco to let use its online shopping site to sell its goods? No, but that’s essentially what the regulator is trying to do here. The regulator will never succeed unless it's sets off on the right foot, and in the right direction. There is little evidence of that so far.