The Payment Systems Regulator (PSR) has published the provisional findings of its market review into the ownership and competitiveness of the payments infrastructure that supports the payments systems; Bacs, Faster Payments System (FPS) and LINK.
The PSR is now seeking feedback on the report.
These payment systems are currently owned by a relatively small number of banks, which also control the single infrastructure provider that they rely on to process payments, ‘VocaLink’.
In the UK, VocaLink processes over 90% of salaries, more than 70% of household bills and almost all state benefits. Nearly every business and person in the UK uses its technology and last year the company processed over 11 billion transactions with a value of £6 trillion. (See notes to editors 1.)
The evidence published today indicates that the common ownership of this infrastructure provider by this small number of banks is having a negative impact on innovation and competition in the industry. As a result, the PSR is proposing that these banks sell part of their stakes in VocaLink in order to open the market and allow for more effective competition and innovation.
The interim report also shows:
- The way operators procure payment infrastructure services prevents other potential providers from competing in the field. Therefore the PSR is proposing that a new competitive and transparent procurement process is introduced. This will be an open, independently monitored process, based on best practice. It will be used as soon as an operator’s current contract with VocaLink comes up for renewal.
- UK payment systems communicate with the infrastructure provider using their own ‘message’ standards that are not widely used elsewhere in the market. The PSR proposes that a common messaging standard is introduced to level the playing field.
“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,” says Hannah Nixon, Managing Director, Payment Systems Regulator.
“There needs to be a fundamental change in the industry to encourage new entrants to compete on service, price and innovation in an open and transparent way.
“Our proposals will increase competition and create more opportunities for challengers, fintechs and other organisations looking to enter the market. 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.”
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