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PSR takes 'generational' step towards wholesale change of the payments infrastructure

Published 07 12 2016
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The Payment Systems Regulator (PSR) has today proposed changes to the way payment systems infrastructure is procured and provided, and is the latest step in a series of developments that is bringing wholesale change to UK payments. 

Earlier this year, the PSR unveiled the conclusions of its market review into the ownership and competitiveness of the infrastructure that supports three payment systems – Bacs, Faster Payments Service (FPS) and LINK.1 It found that there is no effective competition for the provision of central infrastructure for these three payment systems.

The PSR identified the common ownership and control of both the payment systems and the infrastructure provider as a key concern. It also cited the need to adopt a common international messaging standard to encourage new entrants, and create a competitive procurement process that addresses consumer needs.

Following these findings, the PSR has today published its infrastructure market review remedies consultation in which it has proposed two measures:

  • mandating a competitive procurement process that will enable new infrastructure providers with different technology to enter the market and drive new and innovative products and services.
  • adopting a common international messaging standard for Bacs and FPS to lower barriers and encourage new entrants to the market.

This package of measures will benefit all users of payment systems, from payment service providers to consumers, by creating a better choice of tailored payment services.

As part of the publication, the PSR also announced that it will not, at this stage, be imposing the divestment remedy on VocaLink, the UK payments infrastructure provider.  The PSR considers that the proposed acquisition of the company by MasterCard would address the ownership related competition problems it had identified in its final infrastructure market review.

The MasterCard transaction is subject to merger approval by the Competition and Markets Authority. In the event that the proposed MasterCard acquisition of VocaLink does not receive regulatory approval, the PSR will pursue the divestment remedy.

Hannah Nixon, Managing Director of the Payment Systems Regulator, said:

‘The remedies we are putting forward today are another step in our strategy to bring about a once in a generation change to UK payments. 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.

‘The measures we proposed, together with a change of ownership of VocaLink, will remove barriers and create a competitive procurement process, opening up central infrastructure to competition.

‘In designing our remedies we have paid particular attention to ensuring that they will work effectively with the proposals recently announced by the Payments Strategy Forum. The launch of the Forum’s Final Strategy last week is part of the larger programme of work being undertaken, that will fundamentally change the way UK payments systems operate.’

The PSR expects that the industry will soon begin preparations for several procurement exercises, including for any central infrastructure requirements for the Forum’s new payments architecture. 

The full proposal of remedies can be downloaded from the PSR website here.

Notes to editors

  1. Payment systems infrastructure is the hardware, software, secure telecommunications network and operating environments that support the clearing and settlement of payments.
  2. 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.
  3. 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).