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.