UK payments regulator calls for structural reform

UK payments regulator calls for structural reform

The Payment Systems Regulator (PSR) has called for an overhaul of the UK's payments infrastructure to generate more competition and meet consumers' needs.

The PSR has just completed a market review which concluded that there is no effective competition for any of the UK's three payments systems - Bacs, Faster Payments and LINK.

One of the biggest problems identified by the PSR is the common ownership and control of payment systems and infrastructure providers - a small number of large banks control the majority of payment system operators.

The same banks also currently own and control VocaLink, the infrastructure that processes payments. The PSR has called on the banks to sell their stakes in VocaLink, however, its recent sale to MasterCard may actually resolve this issue, conceded PSR managing director Hannah Nixon.

"As it stands, the current system is not adequate and we need to see a change," said Nixon. "There is not one single area of concern but a series of issues that are entwined and require a holistic approach in order to see them resolved."

In addition to the call for the banks' divestment in VocaLink, the regulator also wants to see a more competitive procurement process from payment system operators and also a common messaging standard that can be applied to all three payment systems.

Payments UK, the industry association formerly known as the Payments Council, which has long argued for open access to the UK payments market, has welcomed the PSR's report but also warned that any changes to market structure or ownership must be implemented in an orderly way.

“The key to success will be to ensure logical sequencing so change is done in the right way and in the right order to deliver benefits for customers and new players whilst critically maintaining resilience, efficiency and security of the billions of transactions that are processed every day," said Maurice Cleaves, chief executive of Payments UK.

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