Another record year for access to payment systems; trend to continue into 2018

14/03/2018

The Payment Systems Regulator’s (PSR) third Access and Governance report shows that access to payment systems in the UK is continuing to improve.

[What is access? See Notes to Editors]

Effective access and well governed payment systems are critical to promoting competition in retail banking and innovation in payments.

The PSR wants payment service providers (PSPs) to be able to get access on a fair, open and transparent basis. Opening up access to more PSPs can lead to improvements in the quality and range of services that consumers receive.

2017 saw seven new participants joining one or more of the interbank payment systems – making it a record breaking year.

Access remains a priority for the PSR, and early projections for 2018 show that a further eleven PSPs could become direct participants in CHAPS, Faster Payments and Bacs this year. In 2016 there were only four new direct participants.

The report also shows:

  • New indirect access providers (IAPs – see Notes to Editors ), ClearBank and Starling Bank, have developed  new access offerings that provide additional choice and  may well improve the experience of prospective Indirect Payment Service Providers.
  • Payment system operators have worked hard to strengthen their engagement with prospective PSPs which has resulted in an improved understanding of the products that are being made available to all users (people, businesses, charities and others) that rely on payment systems.

"Our open access programme is delivering really encouraging results and 2017 was a record year.

"Costs have dropped by as much as 50% compared to two or three years ago; the time to on-board has been cut from the industry norm of about 18 months with one bank achieving on-boarding in seven months; and seven PSPs have joined one or more of the payment systems last year, compared to four two years ago.

"These changes are really important. Without open access, PSPs, particularly challenger banks, simply cannot compete on a level playing field with the bigger banks. Open access is therefore an important driver of competition and innovation in payment services – giving all of us greater choice about how we move and manage our money."

Another exciting development from 2017, is the ability of non-banks (such as money transfer companies and authorised e-money institutions) to apply for settlement accounts at the Bank of England.

This will allow those non-bank PSPs to get direct access, and is an important step towards creating a more competitive and innovative environment with a broader range of participants.

But while there have been significant positive developments, there is still room for improvement. Payment system operators, for example, must continue to focus on the needs of those that use their systems and remain transparent in their decision making processes. Doing so will ensure that payment systems remain well governed and promote effective competition and innovation.

In 2015 the PSR set a number of General Directions on the operators of payment systems, and a Specific Direction on some IAPs. These directions set requirements in relation to access and governance.

Today the PSR is launching a review of these Directions to ensure they continue to be relevant, proportionate and considerate of recent and upcoming market and legislative developments.

The regulator is now consulting on this and welcomes feedback by Friday 8 June 2018.

  • What is access and why is it important? Payment service providers (PSPs) like banks and building societies need access to payment systems to be able to transfer funds for their customers. We want PSPs to be able to get access on a fair, open and transparent basis, and to be able to choose the form of access that suits them best. Opening up access to more PSPs is essential to help create greater competition in payments. This can lead to improvements in the quality and range of services that consumers receive.
  • Different types of access: direct – where one PSP can connect directly to a payment system and indirect - where one PSP relies on upon another PSP to provide access
  • 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 infrastructure providers, in the interest of service-users
    • to promote the development of innovation in payment systems, in particular the infrastructure used to operate payment systems, in the interest of service-users
    • to ensure that payment systems are operated and developed in a way that considers and promotes the interests of service-users