Market analysis from Credas Technologies, the leading identity verification checks provider, has revealed that the vast majority of estate agents are in the dark about the government’s Economic Crime Levy (ECL), when it was implemented or even if they may owe fees as a result of its implementation.

The ECL is an annual charge collected by either the Financial Conduct Authority, the Gambling Commission or HMRC, from organisations who are supervised under the Money Laundering Regulations and whose revenues exceed £10.2m per year.

Introduced to tackle economic crime, those affected must register for the ECL, submit a return each year and pay the required fee.

The ECL impacts organisations that are classed as medium (£10.2m to £36m), large (£36m to £1bn) or very large (£1bn+) based on their revenue, with fees ranging from £10,000 to £250,000 depending on the size of the entity. The new levy is expected to raise in the region of £100 million a year and will in part help fund the government’s new economic crime plan.

Estate and letting agents are one of eight sectors impacted by its introduction for the last financial year, meaning that the first round of ECL fees are due to be paid this September.

However, a survey of UK lettings and estate agents conducted by Credas Technologies found that 74% are unaware of the Economic Crime Levy.

83% were unaware as to when it was implemented, while 81% also didn’t know what revenue threshold they would be subject to an ECL fee from.

Furthermore, 78% stated they didn’t know which sectors were impacted by its introduction, 79% didn’t know how the fee structure worked, 79% were unaware when a potential fee was due to be paid, with the majority (80%) also unaware as to how they would pay a potential ECL fee.

Tim Barnett, CEO of Credas Technologies, said: “The Economic Crime Levy may seem like another paperwork headache from the powers that be and given its relative infancy, it’s understandable that many estate and letting agents are still in the dark about it.

“With the property sector being one of the most susceptible to money-laundering it is something that many agents will need to be on top of, not only when it comes to completing their return each year, but also paying the fee due.”

This is the text of the speech as drafted and may differ from the delivered version. This speech was delivered by our chair, Aidene Walsh at the Innovate Finance Global Summit on 18 April 2023.

Hello everyone.

It’s great to see so many of you here today.

I’m Aidene Walsh, Chair of the Payment Systems Regulator and I’m delighted to speak to you about innovation from a regulatory perspective – what changes and what stays the same and the integral role the PSR can play.

As the regulator of the UK’s payment systems, we always want to see better outcomes for users and for society as a whole.

Our role at the PSR is integral to the success of innovation. In fact, one of our statutory objectives is to promote the development of and innovation in payment systems. And our Strategy makes clear where we want UK payments to go.

Recognising that the world is changing, we continue to look at the wider payments horizon to understand developments and their potential impact. We’re also continuing to engage more with payment systems operators and providers across the ecosystem to ensure the UK continues to deliver a world-class payments infrastructure.

A constant flow of headlines shows the rise of AI and the interlock between data and payments, Web 3.0, Blockchain, QR codes, digital ID, smart contracts, the introduction of Open Banking and CBDC.

We see a morphing between technology, payment providers, banks and commerce to deliver multiple solutions for payment services.

The PSR welcomes innovation in the UK which is happening despite the wider geopolitical and economic challenges such as the Russia/Ukraine conflict, growing tensions in relations between China and the West and, closer to home post-covid, and high inflation. All those things could suggest that innovation isn’t front of mind, but in reality, innovation in payments, whether domestically or internationally, remains very strong.

The technology and ideas are available for transformative payment systems. But innovation has varying degrees of success both in terms of adoption and in the outcomes for the economy.

In some cases, innovation is reactive, such as with banking hubs to address the continuing need for cash as society becomes more digitalised. In other cases, it is adaptive, for example, like finding ways to access legacy card reader technology in a mobile environment. And there are some cases that show that innovation can disrupt, as we have seen with Amazon Go, which has essentially taken the payment out of the user journey altogether.

All these exciting, and conveniently designed developments in payments and technology must be seen in a wider context.

The technology needs to work, of course, but you also need the systems to be in place, and for their rules and requirements to be understood and accepted to make it function effectively.

So, let’s take a look at what stays the same in the face of innovation and then what innovation can drive in terms of regulatory change.

Now, whatever the payment system, the outcomes that the PSR is striving for are that:

• Payment systems meet people’s needs
• Users are protected
• There is effective competition in payments
• Payment systems are efficient

From a needs-based perspective, people will always need to trust that the payments they make are secure and that they are protected if things go wrong. Businesses will always need to trust that they have been paid before letting their customer walk out of the door or dispatching goods. For many retailers, this means that they need certain, reliable and instant payments. We also need things like effective dispute processes and, of course, we need protections against bad actors.

For any payment system to work for a wide set of uses, consideration needs to be given to the wider benefits such as data, a rule book to set standards around dispute resolution and protection. You need to allocate risks and liabilities, including to make sure that incentives are in place to tackle fraud and, there needs to be a commercial model that works for businesses and helps them innovate to deliver payment solutions that build a network of willing customers.

By bringing all these things together, it points to the best approach to innovation being when the PSR can work in tandem with innovators to ensure these outcomes are met.

There has been significant change and innovation in payment systems over the last few years. Some have delivered real benefits – such as the rise of contactless payments or digital wallets. But some have been harmful – like APP scams, or cyber-attacks. In some quarters, regulation needs to play catch up to address the consequences of those harms.

Where there is a gap in the outcomes the PSR expects from innovation, it will intervene. A good example of this is the work the PSR is doing in respect of APP scams.

As our lives have become increasingly digital, there has been a huge amount of innovation to address our changing needs, be that in social media or indeed with the exciting offerings that new neobanks bring to us.

With all new opportunities designed to make our lives that little bit easier, bad actors will seek out ways to take advantage. Such opportunistic behaviour across the customer journey resulted in £580m of Authorised Push Payment fraud in 2021. This clearly has a detrimental impact on society.

In this situation, it can be argued that innovation has changed the regulatory approach. In a couple of months, the PSR will publish a forward approach on managing fraud. This approach will incentivise all players in the payments ecosystem to take responsibility for addressing the issue. Crucially, the PSR is playing an influencing role recognising that, “prevention is better than cure,” and is working with various groups and organisations outside of payments to address the root cause of the scams.

Another example of needed intervention is in respect of digital payments, where despite all the excitement and benefits, this innovation also runs the risk of leaving large swathes of society behind.

Regulation has had to respond to this through protecting access to cash whether via banking hubs (under the remit of the FCA) as previously mentioned, and increasingly now through ensuring that Access to Digital does truly become an accessible choice to more members of society.

Changes from a PSR perspective

I have referred to some examples of where innovation has driven a need for regulatory action to ensure desired end user outcomes are met. This will continue to be a requirement.

As the regulator of the UK’s payment systems, we always want to see better outcomes for payment system users, and these can, in part, be achieved through innovation. Innovation is something the PSR can foster by creating a robust but proportionate, flexible and transparent regulatory framework that encourages and drives competition.

With cards now the significant method of payment, it raises the question about what the alternatives are. Its why unlocking account-to-account payments for retail transactions is a key part of our Strategy, as it is for many countries.

We’re already seeing significant growth in account-to-account payments, including those initiated within open banking.

We must make sure the right conditions are in place so that account-to-account payments can deliver new options for retail payments, providing competition to card payments and realising the potential for new ways of paying that offer consumers and businesses greater levels of control and deliver on the outcomes the PSR looks for.

While there are many open banking solutions out there today, mass adoption will happen when regulation and innovation come together to deliver the right outcomes in a consistent way.

A strong example of how innovation and regulation worked positively in a transformative way can be found in Brazil. In 2020 there was a 90% increase in new bank accounts compared to the previous year.

This happened due to the need to distribute COVID-19 relief funds, especially as 34 million people were outside the standard financial system. The enabler of this significant change was Pix which was brought to market in just over a year and deemed ubiquitous within 2 years.

For the UK to succeed with open banking, we need to deliver a central set of rules and standards. Minimum requirements that allow firms to innovate and tailor their service offering to different customers and merchants.

Similarly, for the long-term growth and development of open banking there needs to be opportunity for all parties, including account providers, to be rewarded for innovation and investment. That may mean that payment firms will increasingly see charges for value added services within open banking. This will produce a sustainable commercial model which will enable change.

For the CMA9, if open banking succeeds in payments, it addresses part of that original competition concern unlocking the path to lifting the CMA order and presenting opportunities for all firms to expand into open banking and innovate.

Just this week, the Joint Regulatory Oversight Committee, co-chaired by the PSR and FCA, published its recommendations for the next phase of open banking in the UK. It’s a pivotal point and the JROC recommendations contain a roadmap of priorities over the next two years. The JROC also set out its vision for the open banking future entity, including the next steps which need to be taken in designing it, along with the principles that will underpin a long-term regulatory framework. This will all be supported with legislation that the Government is intending. This is significant progress.

We have already seen significant benefits from opening up our major payment systems to greater levels of competition such as in the case of Wise which was the first FinTech with access to faster payments.

The renewal of Faster payments is the next opportunity to improve access, with the NPA delivering more and cheaper ways to connect through modern API standards enabling the launch of innovative new services on top of the core clearing and settlement infrastructure.

Payment systems generally act as the foundation for innovation in wider payment services and while much of the innovation is by necessity iterative, disruptive entry is also possible in the payments systems themselves. And if those disruptive ideas are coupled with early regulatory engagement, it can lead to efficient successful implementation of a new system.

A good example of this is with the Sterling Fnality DLT payment system, which became a designated payment system for the PSR in 2022. Fnality have consistently engaged with us as their business model evolved enabling them to understand what we, as a regulator, will look for when they are ready to go live.

This ongoing relationship means that when it does go live, Fnality Sterling will be coming from a place of strength, supporting the PSR’s desired outcomes. This can only be considered a good result for both parties.

In terms of new developments, we are also focused on the emergence of a digital pound.

This new technology offers an exciting new way of making payments – backed by the security of knowing that payment users are using a digital ledger at the Bank of England.

CBDC offers an exciting opportunity to improve a range of outcomes for society as well as specifically for users of payment systems.

It also has the potential to encourage greater competition, as well as promoting innovation, choice, and efficiency.

There are also benefits to be had from having another system that will enable the UK to accommodate a wider range of payments. The payment ecosystem will be more resilient and competitive if there are a number of different – overlapping – systems that can take each type of payment. This guards against cyber threats, technical failure and the risk that the system operators fail to innovate sufficiently quickly.

As the Digital Pound project moves forward, the PSR believes we have a role in ensuring development is done in a way that enhances the UK’s payment systems as a whole, providing genuine choice across payment mechanisms. It will have to consider how it meets the expectations of a payment system including appropriate fraud and consumer protections. It will also have to address expected outcomes for end users – namely trust, how the experience links to existing payment mechanisms and systems and to ensure long term sustainability.

In many countries efforts are running in parallel against these latter developments. The PSR recognises the benefit of sharing experiences with other regulators and learning from them, as well as sharing best practice. This doesn’t always need to be a formal process such as a European Commission stepping in with SEPA recommendations for instant payments. Often informal conversations are effective, for example discussions with our equivalent regulators in Australia on how they are approaching open banking payments through their Mandated Payments Service and looking at customer authorisation as an overlay.

We are conscious of the need for regulation to move in step with innovation as both the domestic and international payment system landscapes develop.

Final remarks

Regulation can fully support efficient innovation that is sustainable. In enabling innovation in UK Payment Systems and services, innovators should take confidence from the fact that the requirements and desirable outcomes from a regulatory perspective remain consistent.

They should also take comfort that there is a regulator that recognises the benefit of regulation and innovation working in tandem to support future developments that deliver the right outcomes for payment system users and enables sustainable future services and systems.

Commenting on news that the UK economy grew by less than 0.1 per cent in February, IEA Economics Fellow Julian Jessop said: “The UK economy is still on track to dodge a recession, despite low growth in February. Activity was held back by widespread public sector and transport strike action, but the output of services provided by the private sector is continuing to recover.

“Early evidence suggests that the economy grew again in March and in the first quarter as a whole, probably by around 0.2-0.3 per cent.

“Nonetheless, that would be little to cheer. Simply beating the gloomy forecasts of organisations like the IMF is a pretty low bar. The UK economy risks being kept in the slow lane by a combination of high tax and spend policies, dysfunctional energy and housing markets, and a pervasive belief that the ‘government always knows best’.”

Outgoing Chair Chris Pond shares his reflections on his time at the Lending Standards Board (LSB) and offers up some thoughts, and predictions, for the future.

What has been the most rewarding aspect of chairing the LSB?

Without a doubt, working with a fantastic group of people who are highly professional and very committed to what they’re doing. The LSB is a small organisation, but it’s growing, and punches well above its weight. It’s been very rewarding to see the extent to which both the size of the organisation and its reach has increased over the last few years.

…and the most challenging?

The wider landscape has been incredibly challenging over the past few years. We had the pandemic and now a cost-of-living crisis, which means that consumers and small businesses have been up against a lot and continue to be. They need access to affordable credit and trust that they will be treated fairly by the firms providing these services.

At the same time, banks, lenders and building societies are themselves under pressure. There are increasing demands for forbearance to treat people who find themselves in difficulty as generously as they can, whilst maintaining the balance of having a viable business.

Those registered with the LSB’s Standards and Codes have made a commitment to provide the best outcomes for their customers. As a self-regulatory body, we have the agility to update those best practice frameworks to reflect the landscape and provide registered firms with the tools they need to deliver fair outcomes no matter the circumstance. So, whilst the evolving landscape has been one of the most challenging aspects of my time here, seeing how quickly the LSB has been able to adapt has been one of the most rewarding things too.

Fraud has, unfortunately, continued to evolve over the last six years. What do you think isn’t being talked about enough on this front? Is there anything about the rise in scams that has particularly struck or surprised you?

It’s unfortunately not a surprise that there are scammers out there, prepared to take advantage of the tragedy of the pandemic, or the cost-of-living crisis, and to feed on people’s vulnerabilities.

Whilst the reimbursement work is extremely important, the real job is preventing this from happening in the first place, and that’s where the CRM Code is so important. We must find ways in which we can stop people going through the anxiety, and the life changing impact of losing substantial sums of money to scams.

Much of your career has been focused on financial inclusion. What have been the most important developments in this regard? And where do you think there is still room for improvement in the financial services sector?

I set up the Financial Inclusion Commission 10 years ago; an independent body, which works closely with the LSB and with other organisations across the political spectrum. What we have managed to do in that period is raise the issue of exclusion on the policy agenda. If you don’t have access to a bank account, it’s difficult to get a job or a home, and you’ll often pay more unless you can use direct debit. People who most need, for instance, home contents insurance because they live in high crime areas, are least likely to have that sort of protection. If you don’t have access to savings, when things go wrong, there is nothing to act as a cushion.

When people find themselves in those circumstances, they pay a heavy additional price. We hear about the cost-of-living crisis, but there’s also a poverty premium – those least able to afford certain services who end up paying more as a result. We must get the message across that there is a large section of the population who are in a very precarious situation, and, because we are a consumer driven economy, that means the economy is also in a precarious situation.

Excluding certain sectors of society means we miss out on the valuable contributions they would have made to the financial ecosystem and beyond. The LSB recently published a report on inclusion in business banking for disabled customers, ensuring that firms provide inclusive services for this vital community. We have also recently reviewed and updated the Standards of Lending Practice for personal customers to ensure inclusion is considered throughout the entire customer journey. There’s much more coming down the track in this space over the coming months too.

What other market pressures (other than the rise in fraud) are driving need for the LSB Standards and Codes?

In a wider sense, the move to digitisation. Increasingly, services are available digitally but not face-to-face. For large sections of the population that is going to prove challenging – we need to ensure that digital financial services are inclusive. The growth of the fintech sector presents an opportunity to make sure we raise standards across the board, but it’s also a threat: many of these new entrants, initially, will not be registered with regulators like the LSB. So, although they provide opportunities for customers, there are increased risks too.

That is why the LSB introduced an interim registration process allowing banks and lenders, no matter their size, to signal their commitment to good outcomes whilst working towards adherence of the Standards and Codes. Not only do the Standards set the bar high for customer protections, they incentivise and inform collaboration via the sharing of knowledge, expertise, and insights between regulators, traditional and challenger banks, and alternative lenders.

What does the future look like for the LSB? Do you think there are any current gaps in regulation where you can add value?

In short, yes. I’ve mentioned the fintech sector and there are also the challenger banks, not all of whom are registered. There also continues to be a significant rise in alternative lending, much of which is not covered by statutory regulation. By working towards best practice standards in the absence of regulation, lenders can ensure customers get the fairest deal.

The LSB will have to make sure that, as the nature of financial services changes, it can be as flexible as possible if it is to increase reach. As a self-regulatory body, we are in a unique position to be agile and act swiftly where protections are needed and where we can add value. It’s vital that policymakers and other stakeholders understand the need for the sort of voluntary regulation the LSB can provide.

My successor, Ken, is a very experienced chair and I am confident he will do a fantastic job at driving forward the LSB’s mission of producing the best outcomes for customers. The LSB will undoubtedly meet new challenges over time, but under Ken’s chairmanship I’m sure that we’ll continue to build on the very successful foundations we already have, to reach out to those sectors of financial services where there is no regulation or where greater protections can be afforded to both personal and business customers.

Rome, Italy — With over 22 years of experience as an NPL purchaser and servicer, 18 operating hubs and 2000 employees, Europa Factor is a major player in the Italian market, known for its fair, customer-centric approach and social responsibility focus.

To date, the company has managed more than 20 million customer cases and purchased 370 NPE portfolios in the unsecured credit market. Recently, Europa Factor extended its operations to the banking NPL sector through Credit Factor, a joint venture with IBL Banca.

QUALCO is a leading technology provider that tackles some of the most pressing challenges in the credit and NPL sectors through technology innovation, data insights and leading working practices. Europa Factor and Credit Factor will invest in QUALCO’s proven technology to accelerate their growth plans and take advantage of digital, automation, and analytics capabilities.

Specifically, the companies will implement QUALCO 360°, a comprehensive solution that combines a robust end-to-end collections and recoveries platform with digital self-service and conversational messaging capabilities. In parallel, Europa Factor will use its customer data to bring predictive analytics and data-driven decision-making to its operations.

“Reaffirming our commitment to delivering the highest quality services to the market, we are delighted to partner with QUALCO. This powerful collaboration ensures we have the tools to achieve our business goals and radically improve customer experience,” says Pierluca Bottone, CEO at Europa Factor and Credit Factor.

Marco Cozzi, QUALCO Country Manager in Italy, commented: “We see technology and data playing an increasingly important role in the Italian NPL and receivables market. We are thrilled for our collaboration with Europa Factor and Credit Factor as it allows us to co-create a unique ecosystem that extracts value from technology and innovation.”