What’s the future of payments regulation post-Brexit?

By Gaia Lamperti

With commerce and day-to-day personal finance transactions increasingly moving online, regulatory priorities have been increasingly shifting from financial stability to supporting market innovation. Similarly, technologies that were unthinkable around the turn of the millennium like digital identity frameworks and blockchain technology have entered mainstream conversations and are likely to have profound impacts on the sector.

A new industry report by The Payments Association (formerly The Emerging Payments Association), UK Finance, the collective voice for the banking and finance industry, and global law firm Latham & Watkins, has assessed the impact of UK regulation on payments businesses and identifies key opportunities for enhancements.

The‘UK Payments Regulation Review: Making sense of where to go now’ report explores the impact of regulation and outlines how industry lawmakers and regulators can work together to strengthen and improve the country’s payments infrastructure as well as its regulatory and supervisory frameworks, following Brexit and in light of the expanding digitalisation of the economy.

“It is an exciting and challenging time to be in the space. In a very short time, we have seen the explosive growth of the FinTech industry, the arrival of distributed ledger technology like cryptocurrency and stablecoins and the UK leaving the EU while simultaneously adopting PSD2 regulations,” commented Tony Craddock, Director General at The Payments Association. “This is a timely report that grapples with the major issues in the payments industry and produces ideas on how to create the next generation of regulations, and we are keen to see how the wider industry reacts to the proposals we make.”

With payments as a foundational pillar of the financial services market and the wider economy, as well as a creator of jobs and investment, the report shows how the payments sector can drive change through self-regulation and how its future should involve collaboration between market participants and regulatory stakeholders.

Additionally, it discusses how UK payment firms operate internationally, the importance of market infrastructure access, and the need for regulations to continue to provide international parity to support and reduce friction in cross-border transactions.

Jana Mackintosh, UK Finance, said: “We believe that regulators and industry have an opportunity to think afresh about payments regulation and supervision. This industry report will help players in the sector to reflect on the digitalisation of payments and consolidate past learnings that can be drawn upon as the industry moves forward.”

“The UK and EU payments markets have experienced a prolonged period of regulatory change punctuated by implementation challenges, the impacts of Brexit, Covid-19 and a shifting supervisory strategy of the regulators. With question marks remaining over the UK’s priorities for the regulation and development of the fintech sector, market participants will be anticipating how the regulatory environment is set to progress,” added Brett Carr, Senior Associate Fintech & Payments, Latham & Watkins.