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Payment systems explained

What payment systems are and how they work

Payment systems allow transfer of funds

Payment systems form a vital part of the UK’s financial system – they underpin the services that enable funds to be transferred between people and institutions.

They let you pay a deposit on a house, withdraw money from a cash machine, pay by direct debit, write a cheque, receive your salary directly into your bank account and transfer money via your smartphone. Last year these payment systems processed more than 22 billion transactions worth around £75 trillion.

We've produced a simple infographic to give an overview, but you can also find more detail below.

Download a full size PDF version of this infographic.

Transfer of funds

Payment systems enable the transfers of funds. For PSR purposes they do not include systems for settling securities or those operated by recognised clearing houses or arrangements for the physical movement of cash.

Payment systems

We regulate the operators of these payment systems along with their infrastructure providers and the payment service providers (PSPs) that make up these systems.

  • Interbank payment systems - developed to enable payments to be made between people using their accounts with PSPs (eg, their bank accounts).
  • Card payment systems - enable people to make payments using debit and credit cards. We regulate MasterCard and Visa Europe.

Payment system operators

Payment systems are managed by payment system operators and underpin the delivery of payment services. They are effectively a set of rules that govern transfer of funds between PSPs.

Payment systems infrastructure

A further critical element of payment systems is the provision of infrastructure - essentially the various hardware, software, secure telecommunications network and operating environments that are used to manage and operate payment systems.

This infrastructure supports the clearing and/or settlement of a payment or funds transfer request after it has been initiated.

Payment service providers, or PSPs

It is PSPs that offer payment services to individuals, businesses and other organisations including government - which is the largest user of payment systems by volume of transactions. Types of PSPs include credit institutions (banks, building societies and credit unions), electronic money and payments institutions.

Industry bodies

The industry is represented by a wide range of trade bodies such as Payments UK, UK Cards Association, British Bankers’ Association, Building Societies Association and the Electronic Money Association. These represent and provide services for their sector-specific members.

Other industry bodies include, among others, Financial Fraud Action UK, the Financial Fraud Bureau, Dedicated Cheque and Plastic Crime Unit and PCI Security Standards Council.

Consumer groups

We also talk to a range of organisations that look after the interests of consumers, such as charities and retailers.

These include:

  • Age UK
  • Citizens Advice Bureau
  • Consumer Council
  • Money Advice Trust
  • Which?
  • British Retail Consortium
  • Federation of Small Businesses