Paying should get cheaper as powers are taken from banks

The Government has announced a crackdown on the UK's payment system to cut abuses in money transfers.

It is transferring control of payments from the banks to an official authority by setting up a payment systems regulator.

This body will be given powers to fine culprits and, ultimately, force the big banks to hand over ownership of the systems through which the millions of payments are made each day.

The new regulator will oversee such activities as cheque clearing, credit-card payments, the Link cash-machine network and automated payments systems such as Bacs, Chaps and Faster Payments. These are activities which affect everyone of us.

As such, taking control of them away from the banks is long overdue, according to Which? The consumer body's executive director, Richard Lloyd, said: "We're pleased the Financial Conduct Authority (FCA) will replace the bank-controlled Payments Council as the regulator of the payments system.

"It's ludicrous that this vital part of the banking system has been self-regulated up to now, especially because the big banks own the infrastructure and therefore have an unhealthy advantage in the market."

The banks have been accused of using their near-cartel in payments to set excessive access fees to new challenger banks. It is hoped the new regulator – which plans to be fully operational by spring 2015 – will increase competition by removing cost as a barrier to entry for new banks. The Treasury also hopes the move will reduce fees for consumers.

"The FCA must create a more level playing field for new and smaller banks to help increase competition and deliver real choice for consumers," said Mr Lloyd.