P.CH. - Fotolia
The UK regulatory body set up to increase competition in financial payments by improving access to alternative suppliers has reported significant progress.
By submitting your email address, you agree to receive emails regarding relevant topic offers from TechTarget and its partners. You can withdraw your consent at any time. Contact TechTarget at 275 Grove Street, Newton, MA.
It has halved the time – to as little as six months – it takes for finance firms to join and begin operating on the UK real-time payments system, known as Faster Payments.
When the Payment Systems Regulator (PSR) set out its plans in 2014, it accused banks of adding little more than resilience to the payments system, and set out to promote competition and innovation in the sector.
Banks own the core UK payment schemes – Bacs, Faster Payments and Link – and the infrastructure company that runs them. These systems process more than 90% of salaries, 70% of household bills and almost all state benefits in the UK.
Finance firms that are not members of these schemes – and there are many in the finance sector – must access the systems indirectly through a bank or a gateway service provided by a payment aggregator.
Such indirect access costs money and suppliers have no control over the service or strategy.
PSR managing director Hannah Nixon said it should be made easier for firms to gain direct access to payment systems.
One success for the regulator is the fact that it now takes six to nine months for a finance firm to get up and running on Faster Payments, compared with 12-18 months before.
“There is a lot of change in the consumer market and we want to make sure that as many suppliers as possible can get access to the payments system,” said Nixon.
Read more about the UK payments system
- The UK payments regulator wants banks to loosen their grip on the payments infrastructure by selling off some of their stake in it.
- Banks look set to lose their grip on payment systems because they add little more than resilience, as the new system regulator sets out its plans in its industry consultation.
- The Financial Conduct Authority is planning to open up the payments sector to new companies to improve competition.
- Increased competition in the financial transactions market has moved a step closer with the appointment of a managing director for the newly created regulator.
Nine banks are expected to secure direct access to the system in the coming year, said the PSR. At least four other organisations are planning to offer indirect access, and two are expanding their current services, it added.
The PSR recently called for banks to sell off their ownership of VocaLink, which provides the IT infrastructure that underpins the payment system. It was seen as uncompetitive if a supplier the banks own wins the bid to run the hardware, software and communications technologies that underpin it.
MasterCard has already been named as a potential buyer of VocaLink, but the PSR said it did not want a single company to have a controlling stake.
Commenting on the regulator’s work so far, Nixon said: “Since we became operational a year ago, a key area of focus has been the importance of increasing access to payments systems. Having fair and open access goes hand in hand with having a vibrant and competitive economy.
“Progress has been good and we are seeing some positive outcomes across the payments industry. We are opening up access so more challenger banks and building societies have a real choice between direct and indirect access, and we expect a number of them to exercise that choice in the coming year.”