95/01
3 August 2001
OFT TO REGULATE COMPETITION IN PAYMENT SERVICES
Banking payment services will become more competitive under proposals announced by the Treasury today. The Office of Fair Trading (OFT) will become the regulator of the systems by which debit card, credit card, cheque and other payments are made.
The Government believes that more competition between banks and others involved in making and receiving payments will lead to lower charges for consumers. As well as ensuring clearer pricing, the OFT will be seeking better access to payment systems for banks and other financial services providers. The Government also hopes the new regime will lead payment service providers to better manage and develop their systems.
Announcing the publication of Competition in Payment Systems: A Response to Consultation, the Chief Secretary to the Treasury, Andrew Smith said:
“In publishing our revised proposals for taking forward the Cruickshank report’s recommendations on payment systems, I can confirm that we intend to introduce a new competition regime for the payment systems industry.
“Systems for delivering payment services such as credit cards, cheques and direct debits affect every user of the banking system, whether personal customers or businesses. This Government is determined to put in place means to encourage competition in these services in the interests of all users.”
The report is available below in Adobe Acrobat Portable Document Format (PDF). If you do not have Adobe Acrobat installed on your computer you can download the software free of charge from the Adobe website.
For alternative ways to read PDF documents and further information on website accessibility visit the HM Treasury accessibility page.
Media links
Notes to Editors
1. There is a wide range of payment systems in the UK from cash, cheques, debit and credit cards to the automated clearing systems which underpin direct debits and standing orders. Consumers pay for these services in a variety of ways. For example, small business typically pay for every payment they make or receive (by cheque and electronically) and retailers pay a fee every time they accept a credit or debit card.
2. There has been considerable growth in the value of payments going through the UK's payment systems over recent years. In 1999, the value was over £100 trillion, more than 100 times UK GDP. An amount equivalent to about half of GDP flows through the UK's payment systems every business day.
3. Approximately 120 million bank and building society plastic cards (credit, debit and charge cards) are in issue in the UK. Over 85% of the adult population holds one or more plastic cards. Approximately 3.4 billion purchases were made with plastic cards in 1999, and this is expected to double in the next ten years.
4. Nearly half of our personal cash requirements are now obtained from automated teller machines (ATMs). There are over 28,000 ATMs in Britain today, 7,600 in non-bank locations. Over 112 million cards can be used in ATMs and £108 billion was withdrawn from cash machines in 1999. Around 5 million withdrawals were made every single day, with withdrawals averaging £55 each. Regular adult users of ATMs make an average of five withdrawals per month.
5. The Chancellor announced the setting up of the banking review in the Pre-Budget report of 3 November 1998 (PBR press release HMT3). Its terms of reference were to:
- examine the banking sector in the UK, excluding investment banking;
- examine the levels of innovation, competition and efficiency in various sub-markets, including SMEs;
- look at how these levels compare with international standards;
- consider whether there are options for change which the industry or Government should consider.
6. Don Cruickshank's report Competition in UK Banking: A Report to the Chancellor of the Exchequer was published on 20 March 2000. It recommended that payment services be regulated. (It is available on the Banking Review website - link below - together with press releases issued by the Banking Review team).
7. Chancellor of the Exchequer, Gordon Brown, announced his intention to open up access to payment systems and oversee access charges in his March 2000 Budget speech (Budget 2000 press release HMT1).
8. The Chancellor gave the Government's detailed response to the Cruickshank report on 4 August 2000 (HM Treasury press notice 98/00).
9. The Treasury brought forward detailed proposals on payment systems in its December 2000 consultation document Competition in Payment Systems (Treasury press release 148/00; click on the link below for the consultation document. The consultation period closed on 20 March 2001. The Treasury today published revised proposals, in the light of the consultation exercise.
10. The Treasury will introduce the legislation necessary to make the OFT the regulator as soon as Parliamentary time allows.
11. Under the proposed regime, the OFT will have the power to conduct competition investigations into the provision of payment services; investigate complaints about competition on payments services; collect information in relation to payment services; and enforce a set of competition rules, make determinations and impose financial penalties.
12. Where consumers wish to take advantage of improved and clearer charges and transaction times by another bank, switching accounts will be made easier by the review of the Banking Codes, led by DeAnne Julius (Treasury press notice 78/01).
13. Media enquiries should be addressed to Liane Farrer at the Treasury press office on 020 7270 5192
Internal links
- Competition in Payment Systems - consultation document
- Treasury press notice 78/01
- Treasury Press Notice 98/00
- Treasury Press Notice 148/00
- BUD 2000 Press Notice HMT 1: Prudent for a Purpose