On February 25, 2016, the Payment Systems Regulator published an interim report following its market review into bank ownership and payment infrastructure competitiveness in the UK. The PSR’s motivation to conduct the review stems from its statutory objective to promote competition and innovation in the market for payment systems and the services that the systems provide. The Report outlines the PSR’s provisional finding that there is no effective competition in the central payment infrastructure market. Payment infrastructure is the technology and physical means to facilitate payment systems, such as the transfer of funds. The Report states that a small number of banks currently own and control a majority of the payment systems infrastructure in the UK, namely the three main interbank payment systems, Faster Payment Service, Bacs and LINK, are all serviced by the same payment infrastructure provider, VocaLink. According to the PSR, as banks or payment service providers own and use the service provided by VocaLink means that it is unlikely that they will seek to use an alternative payment provider. The PSR has taken the view that customers could benefit from the introduction of competition into the infrastructure services market which could bring increased efficiency and decreased prices. The PSR has suggested potential remedies to the problem outlined in the report, including: competitive procurement exercises for infrastructure service providers to assist in contract allocation, enhancing of interoperability in the international market through a common message standard amongst payment systems and divestment by PSP’s shareholders of their interest in VocaLinK. The PSR is taking submissions on the initial findings and any views on potential remedies to the issues identified in the Report by April 21, 2016. The PSR will publish a report outlining its findings and conclusions later this year.
The PSR’s interim report is available at: https://www.psr.org.uk/sites/default/files/media/PDF/MR1522-ownershipcompetitiveness-infrastructure-interim-report.pdf.