The provision of open access to UK payments systems is seen as a critical enabler for innovation in the financial services sector, but challenges over funding and the achievement of consensus among competing industry participants may stymie progress, says Payments UK in a new report.
Setting out the debate in its latest World Class Payments report, Payments UK explains that "‘Open Access’ is about achieving the optimum arrangements for the 2,500 PSPs that potentially need to access UK payment systems to enable them to be competitive and innovative without compromising the resilience and security of the payments infrastructure".
Currently, organisations wishing to provide users with facilities to make and receive payments can choose either Direct Access through a payment scheme or Indirect Access through a sponsor arrangement. PSPs who wish to offer a full range of services to their customers face the daunting prospect of making separate arrangements to join each of the UK four main payments networks - Bacs, Chaps, faster Payments and Link - as well as the major credit card schemes.
Outlining the challenge presented to new entrants, Metro Bank head of payment change Becky Clements states: "We feel that the existence of many similar systems with different rules and governance procedures is unnecessary and inefficient. The industry as a whole needs to work together to simplify the current landscape, saving financial service providers considerable time and resources dealing with the current complexity, and more time focussed on providing value to their customers.”
Both the UK's Payments Systems Regulator and strategy setting body the Payment Strategy Forum are reviewing access arrangements and the measures that need to be adopted to boost competition in the industry.
The Bank of England has also stepped into the breach, announcing plans to extend direct access to the UK's real-time gross settlement beyond the current set of firms, allowing a range of non-bank PSPs to compete on a level playing field with banks, a move which has been welcomed by PSR>
The Payments UK report identifies four main hurdles that have to be crossed in order to support the wider delivery of Open Access in the UK:
- Industry agreement on the way forward and a commitment to deliver;
- A carefully planned and managed transition plan would have to be agreed;
- Consensus would have to be reached on the funding model to deliver change; and
- Collaboration would have to be achieved between diverse and sometimes competing industry players across a divergent payments market.
Tim Yudin, Payments UK’s director of design and delivery, comments: “A clear conclusion from our work with both existing and potential users of payment systems in the UK has highlighted Open Access as a crucial enabler to support healthy competition and innovation in the industry. Delivering further improvements to enable access to payment systems does not come without its challenges, but achieving it would boost competition which will, in turn, ultimately benefit customers.”
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