The UK’s payment clearing system, Faster Payments, has issued plans to expand the service to more payment providers over the next year.
A new whitepaper by the organisation also explores a possible co-operation with the Bank of England in a move that could develop new settlement models for non-bank service providers, BankingTech reported.
The expansion of Faster Payments is part of a drive to increase its reach by developing a new access model for new payments players, and, by doing so, improve the payments system in the UK.
There are some significant obstacles to the involvement of a wider range of payment service providers in the Faster Payments system. For example, the fixed cost of communication links between the PSPs and the central infrastructure impacts smaller players the most. On top of this, some PSPs have a lack of IT and other resources, which could problematize the need for 24/7 operations. It could also be challenging for PSPs to obtain a banking licence and sponsorship. There is also the requirement for collateral to guarantee settlement.
In order to bypass these issues, the organisation has set out a new access model, which aims to promote competitive aggregation services that will make it easier and cheaper to join the scheme.
The new access model will meet increased demand from the client base of smaller payment service providers for immediate, real-time payment services by being more cost effective compared to the direct participation model, the organisation says. By aggregating demand from multiple PSPs seeking access, accredited suppliers would be able to share the fixed costs of build and operation over a larger volume of payments and concentrate operational skills into critical mass bundles, the whitepaper noted.
Faster Payment anticipates that these competitive aggregation services could equally be exploited by PSPs that wish to settle directly at the Bank of England, as well as PSPs that either do not wish to or cannot settle at the Bank.
Faster Payments also believes its new access model will benefit existing members of the Faster Payments scheme hoping to update their own service to take advantage of new technologies on the market. It will also provide infrastructure providers with opportunities to engage with new clients in the UK market, be a first step into all clearings where no pre-existing access service is in place, and be used in other non-UK markets once these begin to adopt real-time services, a process which seems to be in the works.
The scheme hopes to have the appropriate changes in place to have financial technology vendors poised to launch the new access model by the end of next year. Each vendor will have an anchor tenant, accreditation service for vendors will be launched, and a pipeline of additional payment service providers will be working with vendors. By the end of 2016, it plans to have a competitive market of Fintech vendors fully connected and accredited into the scheme and a dozen new PSPs using existing and new settlement models.
The payments system as a whole is in a state of flux, and, if this plan comes to fruition, it may be able to clarify the fragmented market as another lot of non-bank payment providers rear their heads.
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