PSR paves the way for competition in payment systems infrastructure

The Payment Systems Regulator (PSR) today publishes its final decision confirming reforms to UK payment systems infrastructure to deliver better and more innovative services for customers. This follows a review published in December 2016 of the way payment systems infrastructure is procured and provided.

Payment systems infrastructure is the network by which payments are cleared and settled. This network allows us to transfer funds and make payments to other people and organisations. For example, without this network, salaries could not be paid into bank accounts, cards would be unable to withdraw cash from ATMs and we would be unable to purchase items from retailers, including online purchases.

In its review, the regulator found there is no effective competition in the provision of central infrastructure for the main UK retail payment systems – Bacs, Faster Payments and LINK. Now, to promote more competition the regulator requires that industry implements two remedies to help deliver change and improvements for users. Those remedies are:

  • To undertake a competitive procurement process for future central infrastructure contracts. This will ensure fair, open and transparent procurement of central payment systems infrastructure and will enable new technology providers to enter the market and drive new and innovative products and services.
  • To adopt a common international messaging standard for Bacs and Faster Payments to lower barriers and encourage new entrants to the market.

The PSR expects the industry to start preparations for its procurement exercises immediately so that users of payments systems, including consumers, can see the benefits from 2020.  Faster Payments has already adopted common messaging standards.

The PSR had also identified that the ownership and governance arrangements at Vocalink reduced the level of competition in the provision of central infrastructure services. However, the PSR believes that Mastercard’s recent acquisition of Vocalink will address the competition issues around ownership originally identified, meaning there is no longer a requirement for a divestment remedy.

These changes should open the industry to new technology providers and innovators, and help improve and create new payment services for everybody who uses payment systems (for example, mobile payment or banking apps).

Hannah Nixon, Managing Director of the Payment Systems Regulator, said: ‘These remedies are another step forward in our strategy to bring about a once in a generation change to UK payments. This work will remove barriers to entry, create a competitive procurement process and drive innovation to help meet the needs of all users of payment systems – be they consumers, small businesses, or banks.’

Full details can be found in our final remedies.

The PSR has three statutory objectives: to promote effective competition in the markets for payment systems and for services provided by those systems, including between operators, payment service providers and also infrastructure providers, in the interest of service-users; to promote the development of innovation in payment systems, includes in particular the infrastructure used to operate payment systems, in the interest of service-users; and to ensure that payment systems are operated and developed in a way that considers and promotes the interests of service-users.

The PSR is the regulator and concurrent competition authority for payment systems in the UK and all participants in those payment systems (payment service providers, operators and infrastructure providers to those payment systems).

The PSR had originally considered a third remedy surrounding the divestment of Vocalink, however, we’re satisfied Mastercard’s acquisition of Vocalink has addressed the competition issues around ownership. The PSR website.