Retail payments systems are a key element in the financial infrastructure of any capitalist economy through them governments can enact economic policy and individuals and companies can conduct their transactions. A recent development for UK retail payments systems has been the recommendations of the ‘Review of Banking Services in the UK’ (the Cruickshank Report). In this report, recommendations are made as to the operation of the primary UK retail payments system (APACS); a new regulatory framework and the removal of ‘barriers to entry’ are proposed to encourage greater competition in the industry. This paper considers these two proposals, which have both received government support for early implementation, in terms of wider policy issues
surrounding payments systems, including economic efficiency and safety and security, and the economic incentives which underpin the present retail payments system in the UK. It is concluded that the proposals for regulation of business activities to promote competition may underestimate the importance of payment system safety and security regulation. Equally, the proposed removal or substantial reduction in barriers to entry to individual payments systems may have a range of unforeseen consequences.