The big banks should loosen their grip on the payments system so that innovation and competition can be encouraged.
This is the provisional finding of the Payment Systems Regulator (PSR) which has just published a market review into the ownership and competitiveness of the infrastructure that supports the payments systems.
Bacs, Faster Payments System (FPS) and LINK are owned by a small number of banks. These institutions also own the infrastructure provider that processes the payments, known as ‘VocaLink’.
Last year this system processed over 11 billion transactions with a value of £6 trillion. This included over 90% of salaries, more than 70% of household bills and almost all state benefits.
PRS Managing Director Hannah Nixon said: “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.
“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.”
The PSR now wants feedback on its findings.