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25 February 2016

BBC: Big banks should loosen control of payments system


Big banks should loosen their stranglehold on the system behind the way consumers pay for things to encourage innovation, the Payment Systems Regulator said.

The infrastructure behind processing payments - such as same-day transfers of money between accounts - is owned by a small number of banks. They also own the system that is used to process 90% of UK salary payments, called VocaLink. The Payment Systems Regulator now wants banks to sell their stake.

In addition to salaries, more than 70% of household bills and almost all state benefits are processed through VocaLink. It processed 11 billion transactions with a value of £6 trillion last year.

Payments systems such as Faster Payments, as well as Bacs - which processes direct debits - and the Link network of cash machines are all controlled by the big banks.

The regulator said all of this should be open to new entrants into the banking sector, allowing small challenger banks to offer the same services to customers as big banks, as well as promote new ways of paying for things.

Hannah Nixon, managing director of the Payment Systems Regulator, said: "The payments industry has evolved at a steady pace, but now is the time to ask whether or not it is operating best practice.

"The evidence we have gathered shows that common ownership is hampering competition and the speed of innovation in the market."

A spokesman for Payments UK - which represents the current system and the banks that own it - said: "Changes in technology, customer payment needs and an evolving payments industry makes the time right to review what is going to serve the UK's best interests in the future."

Full article



© BBC - British Broadcasting Corporation


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