26 Feb 2016
The Payment Systems Regulator has warned that the UK’s largest banks have too much control over the way payments are made, and says that the market should be open for greater competition.
A small number of major banks own the infrastructure behind common payment processes such as same-day transfers between accounts and the direct debit system Bacs.
They also own the Link network of cash machines and VocaLink, the system used to process 90% of UK salary payments and more than 70% of household bills, as well as virtually all state benefits. Last year, VocaLink processed 11 billion transactions with a value of some £6 trillion.
Now the payments industry watchdog has suggested that banks should sell some of their stakes in these systems, effectively giving smaller ‘challenger’ banks the opportunity to offer the same services to customers and promote innovative payment methods.
Hannah Nixon, managing director of the Payment Systems Regulator, stated: ‘The payments industry has evolved at a steady pace, but now is the time to ask whether or not it is operating best practice.
‘The evidence we have gathered shows that common ownership is hampering competition and the speed of innovation in the market.’
Harriett Baldwin, the Economic Secretary to the Treasury, said: ‘The Government set up the Payment Systems Regulator to drive competition in Britain's payment system. Today's report is an important step towards a more open payment system which will benefit millions of consumers and firms who rely on it for making payments on a daily basis.’
The Payments Systems Regulator will consult on its report until late April.