Challenger banks bring payments into perspective

Challenger banks bring payments into perspective

Easier access to payments services, the need for a KYC utility and the inevitability of account number portability are among the key themes to emerge from a Finextra survey into the evolving UK payments landscape.

The study - sponsored by VocaLink - sought to gauge opinion on areas that the new Payment Systems Regulator (PSR) will have within its remit from April 2015, including existing UK Faster Payments access arrangements, and measures that have and could be taken to improve competitiveness in the retail banking sector.

The survey - conducted between July and August - received 117 responses from across the UK, representing 72 different financial groups. Respondents acknowledged cost and ease of access as key constraints to the growth of faster payments, incomplete awareness of the implications of looming new EU regulations under the Payment Systems Directive, and a strong appetite for the development of a shared KYC database.

While there seemed to be a general acceptance that the new regulator would look to boost competitiveness further through the introduction of full account number portability, a third of respondents felt that the costs would outweigh the benefits of such a move.

On the issue of streamlining access to the Faster Payments Service, Chris Dunne, payments services director, VocaLink, says: "This is a critical area of focus for us and we are working hard to provide the market with a service that allows technical connection to FPS and other payment infrastructures at a fraction of the current cost. However the technical aspects are only part of the challenge - the access criteria, rules, and settlement arrangements are all essential aspects that need to be improved."

The full survey results and report can be downloaded here.

Comments: (6)

A Finextra member
A Finextra member 23 September, 2014, 12:32Be the first to give this comment the thumbs up 0 likes

Shared KYC database - very dangerous to the system but very good for new entrants. Little players should have the same risks and responsibilities as big players in this area; otherwise they can become a soft point-of-entry. Once a rogue person or entity has been established falsely in such a database, you have a mole inside the system that can burrow freely and in any direction. How could it be ensured that KYC data was regularly refreshed? From which Trusted Third Parties would it derive its data and who decides whether the processes of those TTPs are watertight? Who would carry the legal liability for a failure and pay the heavy financial penalty (and that is the key to making sure the work is done properly)? And who would run it? I think we can see who is putting themselves up for that role.

A Finextra member
A Finextra member 23 September, 2014, 12:571 like 1 like

@Anonymous - the bank that owns the customer owns the legal liability; it can outsource processing but not liability (although it could choose to mitigate some of that risk contractually).  But you are right that these are some of the central issues to explore.

In terms of who would run such a database, there are already organisations out there - SWIFT has signed up Barclays, Deutsche Bank, Erste Group Bank, HSBC, ING and Raiffeisen Bank International to its KYC Registry, and Thomson Reuters recently launched Accelus Org ID to act as a neutral 'central clearing house' for identity credentials. 

So the ball is already rolling.  The key is to define what should be collaborative and what should be competitive between banks.

A Finextra member
A Finextra member 23 September, 2014, 14:211 like 1 like

A utility can often provide a better quality service. The current baseline of an old gas bill and a copy of a passport (rarely verified; nor re-verified at appropriate intervals) is far from 'strong' KYC. A utility might deploy identity verification technology already in wide use; retina scans at airports, fingerprints, palm that competitive or collaborative space?

John Bullard
John Bullard - TrustChains - London 23 September, 2014, 17:24Be the first to give this comment the thumbs up 0 likes

A scheme based approach where particpating banks (and by extension their Customers) know and understand and sign up to the liabilities and entitlements, the rights and obligations of all parties- is why IdenTrusts Trust Network was established (as a distributed liability model).  These aspects are defined thru 4 specific but interlinked dimensions, namely Policy Legal Operation and Technical- so that complete Business interoperability and associated liability is established upfront... not in hindsight....or after the the cat is out of the bag (or the mole is already burrowing...!) 

A Finextra member
A Finextra member 14 November, 2014, 13:32Be the first to give this comment the thumbs up 0 likes


There can be no radical overhaul of UK payments and methods - or challengers in retail banking or to the card schemes until the Payments Council and/or Payments System Regulator (A new regulatory framework for payment systems in the UK PSR CP14/1) MANDATE a centralized UK KYC identity.

How this is best achieved is beyond the scope of this thread -

Nothwithstanding it is the vital 'cornerstone' in enablement of rapid market changes in terms of both infrastructure and new schemes and products which are badly needed in the UK payments space.


Establishment of centralized KYC will revolutionize payments - methods - schemes and products.


2015 ?


A Finextra member
A Finextra member 14 November, 2014, 14:131 like 1 like

a centralised KYC utility might also serve to fill a gap in the taxonomy of a maturing virtual currency services