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PSR PS19/2: Specific Direction 4a (Procurement: LINK)

Published 07 03 2019

We are publishing a new Specific Direction which varies the text of Specific Direction 4 (procurement: LINK).  

Background

On 1 February 2019 we published a consultation paper CP19/1 on our proposal to vary our Specific Direction 4. We proposed pushing back the deadline for LINK’s central infrastructure services (CIS) to be provided by the winner of a competitive procurement process. We would extend the deadline by six months (from 2 April 2021 to 2 October 2021).

We proposed this because Link Scheme Holdings Ltd (LSHL), the operator of the LINK ATM system, told us it can’t complete its competitive procurement process to the timeframe we specified in Specific Direction 4. This is for a variety of reasons, including:

  • a range of outstanding issues to be resolved in its contract negotiaions (including being able to assure itself that the new contract will enable it to perform its role as a systemic risk manager)
  • amended governance processes with stakeholders which need to be factored into the timetable
  • the need for contingency for unanticipated delays

For more detail please refer to CP19/1: Draft Variation of Specific Direction 4 on competitive procurement of central infrastructure (LINK) (February 2019)

Responses to the consultation

We received eight responses (two building societies, two large banks, two challenger banks, one independent ATM deployer (IAD) and one card scheme operator). They all supported our proposal of a six-month extension and agreed with the rationale we presented in the consultation paper.

One respondent emphasised that it is ‘essential’ that the transition period is no shorter than two years.

Two respondents  indicated that it was better to take longer to get the procurement process right than risk a less effective procurement, or shortened transition, by holding fast to an overly aggressive timetable. These respondents also expressed concern with the costs to members of LINK switching its CIS provider. One bank wrote that ‘costs and risk associated with any change from what is an extremely reliable, embedded and secure solution must be fully and robustly understood before undertaking any such change’. The IAD said that, given the costs of the ‘significant systems changes’ for members, ‘the financial benefits of making such a change will need to be substantial and rapid’.

Some stakeholders expressed concerns about the cost of the competitive procurement (in particular the cost of switching to a new provider) and said that a six-month extension would give LINK members time to evaluate the costs and benefits of appointing a new CIS provider.

Our response

Having taken account of the consultation responses, which all supported our proposed extension, we still consider that extending the deadline in Specific Direction 4 by six months by giving a new direction is the best way to ensure that LINK’s procurement process is effective and competitive. This extension should secure certainty of supply and maintain the two-year transition as we originally envisaged. 

Decision

We have decided to give the direction (Specific Direction 4a) that we consulted on.

See here for the consolidated Specific Direction 4, containing the varied text, and see here for the original Specific Direction.