Competition regulation will stifle payments innovation
Dermot Turing, partner in the international financial institutions and markets group at Clifford Chance, told delegates at the International Payments Summit in London that moves by regulators on competition and interchange practices are acting as “a serious brake on innovation and standardisation” work and called for clearer guidelines on who needs to be involved at what stage.
Regulators fear that financial institutions are keeping competitors out of the provision of payments by erecting technical obstacles and have announced that they want to “open up the payments infrastructure”.
Looking at the wider theme of regulation, Turing said that regulations such as FATCA and AML are casting the banks in the role of special constables – “helping the police force without being paid”.
This is not necessarily a bad thing – payments providers and transaction banks should engage with regulators and policy formers in an educational way, to help them understand that they provide a socially useful function. “Your are not the casino bankers who caused the crash, you are not the traders who manipulated Libor and caused the scandals – you are the special constables,” he said.
Turing also reminded his audience, that they are not the only people facing a mountain of regulation.”You think you have it bad, but you haven’t really – there are people in the business next door that are looking at EMIR, and AIFMD and MiFID,” he said. “The payments stuff is an insect compared to the juggernaut that they are facing.
For this reason, he said it is important that the industry makes its case with the regulators, lest regulations intended to protect consumers and increase competition have unintended consequences. “Let’s remind the policy makers that, essentially, they should back off slightly,” Turing said. “Otherwise the future is bleak, and people will start to exit this business.”