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PAYMENT INFRASTRUCTURE
Payment politics: ownership and competition
Neil Ainger takes a look at the UK Payment Systems Regulator’s (PSR) proposals to shakeup the market
infrastructures and the ease of accessing them directly or indirectly are always prime concerns for regulators. The new PSR has made it one of its primary focuses and just completed their consultation periods ahead of final reports this summer into ownership and indirect access.
T
The ownership of national payment
Payment Service (FPS) in the UK, operated by FPSL, and also the Bacs and LINK ATM estate. Ten leading established retail banks in the UK, including HSBC, RBS, Lloyds and Barclays collectively own VocaLink, sponsoring FPS access as participant banks for more than 400 smaller financial institutions (FIs) and other non-bank players. Its technology processes more than 90% of salary payments in the UK and 70% of all household bill payments, totalling more than 11 billion transactions a year worth £6 trillion.
The PSR’s separate interim review finding into the ‘supply of indirect access to payment systems’ has also reported and calls for easier access for financial technology (FinTech) firms, challenger banks and alternative payment service providers (PSPs) to encourage competition. Combined with its ownership interim report, the two sets of PSR proposals could revolutionise the UK payments landscape.
“The evidence we have gathered so far shows that common ownership [of the infrastructure by established banks] appears to be hampering competition and the speed of innovation in the UK payments market,” says Hannah Nixon, Managing Director of the PSR.
This is why the PSR’s provisional ‘ownership and competitiveness’ findings, published in an interim report in February this year, have recommended banks sell their stake in the UK payment infrastructure provider, VocaLink, in order to “help increase innovation and competition”.
VocaLink technology drives the near real-time Faster
“We believe our proposals could increase competition and create more opportunities for challengers, FinTechs and others looking to enter the market,” says Nixon. “This will create the conditions for greater innovation – which is in the interests of those that use the infrastructure services directly, and the UK economy as a whole. At this stage these are only proposals. We are working with industry to gather further evidence to see whether these changes could drive the desired outcomes.”
The final reports this summer will be followed by a further round of consultation prior to adoption, so any changes will most likely not come into full fruition until
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