U.K. Regulator Calls for More Bank Innovation, Competition
The Payment System Regulator (PSR), a government body created to oversee the payment systems industry in the U.K., is calling for the major banks to sell a part of their stakes in U.K.-based payments provider VocaLink, which it claims will create more fertile ground for innovation and competition. VocaLink, which is owned by a small number of banks, provides the underpinnings banks depend on to process many different types of payments.
The PSR’s decision stems from the its market review interim report published today. The report supports “competitive procurement exercises” be taken before central infrastructure service contracts are up are for renewal; and enhanced interoperability, including a common international message standard; in addition to other provisions. The PSR is accepting feedback on the proposals until April 21, 2016.
Rich Wagner, CEO and founder of U.K.-based Advanced Payment Solutions, a provider of payment solutions for consumers, businesses and government entities, agrees banks should sell their stakes in VocaLink. “This would ultimately allow VocaLink to operate as a commercial entity, and this is a necessary step to accommodate today’s financial services environment, Wagner tells Pay News. “We need to see real diversity across the full suite of payments infrastructure in the U.K. if we are to truly drive innovation in this space.”
In the U.K., VocaLink processes more than 90 percent of salaries, 70 percent of household bills and nearly all government benefits, according to a PSR release. Nearly every business and person in the U.K. uses its technology, and last year the company processed more than 11 billion transactions with a value of £6 trillion ($8.4 trillion).
“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,” Hannah Nixon, PSR managing director, said in a press release. “Our proposals will increase competition and create more opportunities for challengers, fintech [companies] 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 U.K. economy as a whole.”
In related news, VocaLink announced January 2016 that it’s working with Raphaels Bank to enable access to the Faster Payments Scheme for several U.K. banks, including competing financial institutions. In 2008, VocaLink built and continues to manage the real-time technology behind the U.K. Faster Payments Service as part of the Faster Payments Scheme. In the U.S., VocaLink announced Dec. 10, 2015, it signed a contract with The Clearing House, a U.S. banking and payments company owned by 24 banks, to develop a real-time payment service.