17 October 2017
Find out more

Payments competition body says banks should sell stakes in VocaLink

25 February 2016  |  9466 views  |  5 London skyline - old Natwest tower and gherkin

The UK's Payment Systems Regulator (PSR) says banks should sell their stakes in VocaLink to help increase innovation and competition in the nation's critical payments infrastructure.

The recommendations follow a review by the watchdog into the ownership and competitiveness of the Bacs, Faster Payments System and the Link network.

These payment systems are currently owned by a relatively small number of banks, which also control VocaLink, the single infrastructure provider that they rely on to process payments.

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 PSR believes that the common ownership of VocaLink by a small number of banks is having a "negative impact on innovation and competition in the industry".

Hannah Nixon, PSR managing director, says: “ 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."

The PSR is also recommending the introduction of a new competitive and transparent procurement process for future payments networks to enable other vendors to enter the market.

"This will be an open, independently monitored process, based on best practice," states the report. "It will be used as soon as an operator’s current contract with VocaLink comes up for renewal."

The regulatory body is also recommending the introduction of a common messaging standard for communicating with the infrastructure provider in order to level the playing field and ease access for new entrants.

“Our proposals will increase competition and create more opportunities for challengers, fintechs and other organisations looking to enter the market.," says Nixon. "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 full report is open for consultation until 21 April.

"The PSR’s proposals will have a significant impact on the payments landscape, so we are encouraging feedback to ensure that the final market review delivers the changes that are needed in a balanced way," the body states.

Comments: (5)

Jean-Pierre Xiao-Min Wang
Jean-Pierre Xiao-Min Wang - IndiceA - Sophia-Antipolis, France | 25 February, 2016, 10:04

Payments competition, Banks & Fintechs :

" A horse never runs so fast as when he has other horses to catch up and outpace. " --- Ovid

 

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Hitesh Thakkar
Hitesh Thakkar - FIS Payments Software and Services India - India | 25 February, 2016, 13:20

Looking at issues at Vocalink, I feel NPCI - Indian national level payment infrastrucure provider is better placed with fast payment including mobile (IMPS) as well as going ahead with Universal Hub based API recently.

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Nick Ogden
Nick Ogden - ClearBank - London | 25 February, 2016, 18:21

Selling shares in a monopoly provider does not create competition, but should reduce any "market disadvantage" controls. The report makes interesting reading but to create a true open market requires true competiton, and I am unclear how just opening access resolves this at a sustainable or practical level. 

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Ramadas Mv
Ramadas Mv - Enterprise Banking Architects - New Delhi | 26 February, 2016, 08:59

This issue seems to be complex for the PSR as the Vocalink operate the central payment processing infrastructure for the UK economy. The regulatory body must look at new models/frameworks by bringing the independent demostic payment infrastructure and messaging standards.

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Jan-Olof Brunila
Jan-Olof Brunila - Swedbank - Stockholm | 02 March, 2016, 07:55

Dear Nick - you are right, selling a monopoly tomomebody else does not create competition. Should owner banks decide to sell, the only taket likely to pay for the value would be a private equity investor. The new single owner would recoup its investment by increasing pricing and cutting cost. The outcome may be that the banks would have to pay more for the services and thus also the end user customers would pay more. Cost cutting  could mean that one pays more but gets a poorer service. The only thing achieved would then be that no bank has an advantage - instead everybody have a more exoensive and poorer service...

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

PSR calls for further improvements in access to UK payment systems

PSR calls for further improvements in access to UK payment systems

15 December 2015  |  6271 views  |  0 comments | 6 tweets | 5 linkedin
MyPINpad  and VocaLink bid to digitise consumer PINs

MyPINpad and VocaLink bid to digitise consumer PINs

23 November 2015  |  8515 views  |  5 comments | 14 tweets | 9 linkedin
VocaLink lands real-time payments deal with The Clearing House; Early Warning buys clearXchange

VocaLink lands real-time payments deal with The Clearing House; Early Warning buys clearXchange

26 October 2015  |  8814 views  |  0 comments | 10 tweets | 18 linkedin
Thailand signs instant mobile payments deal with VocaLink

Thailand signs instant mobile payments deal with VocaLink

12 October 2015  |  11659 views  |  0 comments | 14 tweets | 10 linkedin
Banks are key in the move towards mass mobile payments - VocaLink

Banks are key in the move towards mass mobile payments - VocaLink

09 September 2015  |  9603 views  |  2 comments | 26 tweets | 23 linkedin
PSR appoints Ruth Evans to helm Payments Strategy Forum

PSR appoints Ruth Evans to helm Payments Strategy Forum

15 July 2015  |  6738 views  |  0 comments | 4 tweets | 1 linkedin
VocaLink appoints aviation expert to head up new regulatory division

VocaLink appoints aviation expert to head up new regulatory division

11 May 2015  |  4921 views  |  0 comments | 1 linkedin
New UK payments watchdog proposes tough regime

New UK payments watchdog proposes tough regime

13 November 2014  |  11019 views  |  6 comments | 18 tweets | 26 linkedin
Visa and MasterCard face scrutiny by new UK watchdog

Visa and MasterCard face scrutiny by new UK watchdog

14 October 2014  |  13081 views  |  0 comments | 17 tweets | 14 linkedin
Mobile payment network Zapp wins big-ticket retailer support

Mobile payment network Zapp wins big-ticket retailer support

08 October 2014  |  10584 views  |  1 comments | 8 tweets | 7 linkedin
Singapore taps VocaLink for faster payments

Singapore taps VocaLink for faster payments

08 May 2014  |  11019 views  |  2 comments | 12 tweets | 14 linkedin
VocaLink unveils Zapp m-payments service for banks and retailers

VocaLink unveils Zapp m-payments service for banks and retailers

24 June 2013  |  16573 views  |  3 comments | 13 tweets | 15 linkedin
VocaLink reportedly sounding out investors for new mobile bill service

VocaLink reportedly sounding out investors for new mobile bill service

27 November 2012  |  8437 views  |  0 comments | 11 tweets | 3 linkedin
VocaLink partners BCSIS on Immediate Payments in Singapore

VocaLink partners BCSIS on Immediate Payments in Singapore

29 October 2012  |  8508 views  |  0 comments | 2 tweets | 1 linkedin
VocaLink ditches Sepa services

VocaLink ditches Sepa services

22 August 2011  |  18732 views  |  4 comments
VocaLink launches consumer bill payment portal

VocaLink launches consumer bill payment portal

28 January 2010  |  6845 views  |  0 comments
VocaLink buys out Fiserv to take control of EBPP joint venture OneVu

VocaLink buys out Fiserv to take control of EBPP joint venture OneVu

25 January 2010  |  10113 views  |  0 comments

Related company news

 

Related blogs

Create a blog about this story (membership required)
visit www.temenos.com visit www.capgemini.com

Top topics

Most viewed Most shared
Ripple looks to drive bank adoption with $300m XRP rebate programmeRipple looks to drive bank adoption with $...
14484 views comments | 11 tweets | 3 linkedin
Taiwan's Far Eastern International Bank suffers malware attackTaiwan's Far Eastern International Bank su...
13090 views comments | 16 tweets | 22 linkedin
Monzo fends off suitors as current account upgrade beginsMonzo fends off suitors as current account...
8976 views comments | 17 tweets | 14 linkedin
Swift positive on blockchain, but big challenges remainSwift positive on blockchain, but big chal...
7941 views comments | 15 tweets | 20 linkedin
Ripple blockchain network hits 100-member markRipple blockchain network hits 100-member...
7623 views comments | 13 tweets | 13 linkedin

Featured job

Competitive
New York, NY - USA (some flexibility on location)

Find your next job