U.K. Regulator: Banks Stifling Payments Innovation
March 3, 2016
The U.K.’s Payment Systems Regulator yesterday called for banks to divest their stake in the country’s payments infrastructure. The PSR said a relatively small number of financial institutions’ ownership of payments processor VocaLink—which underpins the Bacs payment system, the Faster Payments System, the Direct Debit system and the LINK ATM switching platform—is stifling payments innovation in the country. According to the PSR, VocaLink processes more than 90 percent of the country’s paychecks and more than 70 percent of household bills (11 billion transactions annually totaling £6 trillion ($8.45 trillion)). The regulatory agency, which launched less than a year ago as a subsidiary of the government’s Financial Conduct Authority, said the ownership arrangement produced a “relatively robust and resilient” system, but limits competition and, therefore, innovation in payments.
“The payments industry has evolved at a steady pace, but now is the time to ask whether or not it is operating best practice,” said Hannah Nixon, managing director of the Payment Systems Regulator. “The evidence we have gathered shows that common ownership is hampering competition and the speed of innovation in the market. 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 organizations 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.”
The PSR’s report is available for download. The agency is seeking industry feedback. Interested parties can register their opinion of the review via email at firstname.lastname@example.org before Thursday, April 21.