Payments regulator wants banks to sell stakes in Vocalink

The regulator for the payments sector has proposed that banks sell off some of their ownership of the VocaLink payments infrastructure because that common ownership is holding back competition and innovation.

VocaLink, which is owned by a small group of banks, supports the UK payments systems: Bacs, faster payments and Link. According to the Payment Systems Regulator (PSR), VocaLink accounted for more than 11 billion transactions with a value of £6tn last year.

VocaLink processes over 90% of salaries, 70% of household bills and almost all state benefits in the UK.

PSR was formed last year, and is looking to increase competition in the £75tn UK payments sector. The regulator oversees the sector and encourages new players to innovate to create value for consumers.

“The payments industry has evolved at a steady pace, but now is the time to ask whether or not it is operating best practice. The evidence we have gathered shows that common ownership is hampering competition and the speed of innovation in the market,” said Hannah Nixon, managing director at PSR, following its latest report. 

She added that the industry needs to encourage new entrants to compete on service, price and innovation. “Our proposals will increase competition and create more opportunities for challengers, fintechs and other organisations looking to enter the market.”

When PSR set out its plans in late 2014, it accused banks of adding little more than resilience to the payments system.

Speaking to Computer Weekly at the time, Celent analyst Gareth Lodge said the banks are resigned to losing control of the payments systems.

“I think the banks are pretty much resigned to giving up their ownership,” he said. “The question is who wants to buy it?”