U.K. Regulator Proposals Take Aim at Competition Barriers to Payments Infrastructure
The U.K.’s Payments Systems Regulator (PSR) plans a sea change to the U.K. payments system after determining an inability for new payments infrastructure projects to compete as alternatives to the three interbank payment systems, Bacs, Faster Payments Service (FPS) and LINK.
The PSR on Dec. 7 proposed two measures to address competition pertaining to the payments systems infrastructure, which includes hardware, software, secure telecommunications networks and operations supporting payments clearing and settlement. The proposals include requiring a competitive process enabling infrastructure providers with different technology to enter the market and drive new and innovative products and services, and adopting a common international messaging standard for Bacs and FPS to lower barriers and encourage new market entrants.
The proposals are the result of a PSR market review published earlier this year. “There is a lack of incentives for operators to look for alternative infrastructure providers that could better meet the needs of their service-users,” the report noted. “We consider that this is partly due to the fact that the operators and the infrastructure provider are both owned and controlled by the payment service providers (PSPs) who use them [and] we have also found that there are barriers to entry that prevent or deter potential central infrastructure providers from competing to provide these services.” A market review factsheet also is available.
“The remedies we are putting forward today are another step in our strategy to bring about a once-in-a-generation change to U.K. payments,” said Hannah Nixon, PSR managing director. “The work being undertaken will help open up the payments industry and promote more effective competition and innovation to help all users of payment systems—be they consumers, small businesses or banks.”
Although the PSR report had proposed the four largest PSP shareholders divest their interests in VocaLink, the PSR acknowledged that Mastercard’s pending acquisition of VocaLink “could address the issues we have identified as causing a restriction of competition currently.” Mastercard announced in July it had entered into a definitive agreement to acquire 92.4 percent of VocaLink in a billion-dollar deal. VocaLink’s technology supports the British direct debit and credit payments system, as well as the LINK ATM network and the Faster Payments Scheme for real-time mobile and Internet payments.