Telemedia8.1 member MCP Insight welcomes the announcement that UK Mobile Billing Regulator, the Phone-Paid Services Authority (PSA), is to commence the process of handing back the day-to-day regulation of the market to Ofcom. The expected transfer date is late 2023.
MCP believes this recognises the success of Industry proactive rule enforcement, which has worked alongside the foundational authority of PSA statutory regulation. With Industry providing a framework for swift and intelligence driven action, to correct or switch off services when they drop below expected standards; the Regulator has acted more recently as a back stop to deal with more limited but significant issues.
The timeline of the adoption can be viewed in direct parallel with indicators of improved consumer satisfaction; massively reduced complaints and consumer harm over the last few years, and a growing worldwide market for direct carrier billing being integrated alongside mainstream payment platforms.
The regulation of Mobile Carrier Payments, for the charging of low-cost virtual goods and services on to the phone bill, was exempted from general banking regulation through provisions in the Payment Services Directive 2 (Sept 2019). In the UK, responsibility falls under the jurisdiction of Telecoms regulator Ofcom. Since 2003 through the provision of Section 120 of the Communications Act, Ofcom has outsourced the regulation of the payment mechanic to the PSA.
Ofcom bringing regulation in-house appears to recognise the maturity of the market and reduced investigatory requirement after complaint channels have dried to a trickle.
It appears that the move will not signal any reduction in regulatory standards or expectation, though it is expected that this may open the door to significant cost savings.
It is widely anticipated that significant cost savings could be achieved by the combined operational costs, along with the reduced workload.
It is hoped the reduced financial burden of regulatory oversight – a tax that is ultimately incurred by the consumer through increased product costs – will be passed on, through a reduction in the levy currently applied to the sector on every transaction.
Like many new sectors, the UK Phone Payment industry’s early days started from a loosely regulated “Wild West”, characterised by explosive growth but also spiralling complaints, and providing a challenging environment for the genuine brands to compete and gain recognition for good ethical practice.
During the first decade of regulation complaints and issues remained unabated, despite several different approaches by the regulator. Ever prescriptive Codes of Practice were issued, which, whilst throttling growth and new services development, were a blunt instrument in effectively harnessing bad practice.
Whilst the ratio of complaints to revenue have dropped significantly, it cannot be overlooked that the market stats are also indicative of a decline in the number of traditional merchants investing and bringing services to market. Driven by the prescription of regulation unintendedly placing some restriction on otherwise good innovation.
The perceived jeopardy of massive fines having also deterred some genuinely motivated providers from entering the market, fearful that an unintended mistake, might see their business wiped out.
MCP Founder, Toby Padgham, commented: “MCP believe that there is now a good foundation for the industry to grow sustainably, supported by better recognising and encouraging the self-regulatory ethos and where the regulator acts as a necessary back-stop. Industry is now equipped with more responsive market monitoring, fraud blocking protection, KYC enabling PIN-Loop verification and better-informed risk control procedures. This will enable the market to grow in a more controlled manner.”
The UK market was a pioneer for the introduction of Mobile Payment technology and has undergone and moved past the teething problems of any new market development.
David Ashman, Head of Compliance at MCP, commented: “Regulators and mobile operators in other countries may find it useful to learn from the UK market evolution to avoid the boom-and-bust lifecycle and use targeted self-regulation to build a sustainable market from inception; minimising the need for more prescriptive regulation that might hold back innovation.”