PSR tells banks to sell stakes in VocaLink to increase payments competition
The UK’s Payment Systems Regulator (PSR) says banks should sell their stake in the nation’s payments infrastructure, VocaLink, to “help increase innovation and competition”. The PSR has published its provisional findings of its market review into the ownership and competitiveness of the infrastructure that supports the payments systems; Bacs, Faster Payments System (FPS) and LINK.
The PSR gathered evidence and views from more than 70 stakeholders – including infrastructure providers, operators, payment services providers (including independent ATM deployers), fintechs and associations – as well as conducting desk research and commissioning an international comparisons study.
It concludes that 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.
Hannah Nixon, MD of PSR, says: “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.”
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.
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 report is now open for consultation.
The PSR’s proposals will have a “significant impact” on the payments landscape, so it is encouraging feedback to ensure that the final market review delivers the changes that are needed in a balanced way.
The consultation will remain open until 21 April 2016.