We reported in March 2015 that the PSR had announced its regulatory framework for payment systems in the UK. Alongside its Policy Statement, the PSR launched two market reviews: one into ownership and competitiveness of infrastructure provision, the other into the supply of indirect access to payment systems.

Following a consultation, on Friday 29 May 2015 the PSR confirmed the final terms of reference for its indirect access market review.

What is indirect access?

Payment service providers (PSPs) need access to payment systems in order to be able to offer payment services to their customers and compete effectively. PSPs can access payment systems directly, by contracting with the operator of the payment system, or indirectly, by contracting with another PSP that has direct access to the system.

Indirect access is key to a large number of PSPs, particularly those that are not eligible or do not want to be direct participants. The supply of indirect access services is therefore crucial to effective competition in the retail banking and payments markets.

Concerns have been raised about indirect access over time, including:

  • that there is a limited choice of suppliers.
  • indirect PSPs are forced to buy services from their rivals.
  • there is limited transparency about the terms on which services are offered.
  • uncertainty as to continuity of supply.
  • demand for a greater range of options for indirect access.

What measures are already in place?

The PSR has already issued a direction with its Policy Statement requiring sponsor banks Barclays, HSBC, Lloyds and RBS to publish access-related information. Industry is also developing a code of conduct to try to address some of the concerns that indirect PSPs have.

What is the focus of the review?

The aim of the review is for the PSR to get detailed evidence to develop a deeper understanding of the supply of indirect access. It will look at indirect access provided by ‘Indirect Access Providers’ (IAPs). This includes sponsor banks, which provide indirect PSPs with a unique sort code (Barclays, HSBC, Lloyds and RBS) as well as other direct, and indirect PSPs, which provide indirect access services. The focus of the review will be contractual arrangements between IAPs and indirect PSPs.

Which firms are affected?

The interbank payment systems regulated by the PSR are within scope of the review, namely: Bacs, CHAPS, Cheque & Credit (its current as well as its future cheque clearing model), Faster Payments Scheme and LINK. The PSR has confirmed that Northern Irish Cheque Clearing is out of scope, as is international correspondent banking.

Access issues in relation to the card payment systems regulated by the PSR (Visa and MasterCard) will be considered as part of the PSR’s ongoing programme of work on cards.

The PSR has clarified that as a starting point the review will cover services provided to any indirect PSP registered with the FCA or an equivalent EU regulator, and a broader range of firms will be considered if necessary.

What questions will the review address?

The scope of the questions the PSR will consider as part of the market review has broadened following consultation. It will now consider the costs of switching IAP, the services that are not currently provided by IAPs, but for which there is indirect PSP demand, and the impact of other regulations on the supply of indirect access.

The key questions for the market review are:

1. What prices, service and choice do indirect PSPs want and receive?

This will include considering whether the offering in the indirect access market is consistent with a competitive market and what choice PSPs considering indirect access have, (including direct and technical access).

2. What factors may limit the number of IAPs in the market?

The PSR will consider whether there are any initial or ongoing barriers to entry and expansion that prevent PSPs from becoming IAPs. This will include consideration of regulation with which IAPs must comply and the risks of providing indirect access services.

3. What is the state of competition in the provision of indirect access?

This will involve considering the economic characteristics of indirect access enabling the PSR to develop a framework for considering competition in indirect access services. This will also enable the PSR to assess applications from firms wanting it to assist by ordering operators or PSPs to give them access to payment systems, or to change the fees or terms and conditions of their agreements with IAPs.

4. What options are there to improve indirect access to interbank payment systems?

The review will enable the PSR to determine whether it should take or recommend any action (e.g. amending or issuing new directions or guidance) to improve indirect access to payment systems and indirect access services.

Next steps

The PSR will now begin a phase of information gathering using surveys and requests for information. It has wide information gathering powers; it can require anyone, not just the organisations it regulates, to provide information in connection with its functions. Organisations that fail to comply without reasonable excuse or that knowingly or recklessly providing misleading information to the PSR could have sanctions imposed on them by the court, including a prison sentence and/or a fine.

Responding to surveys, and in particular, requests for information can be a time-consuming and costly exercise. Firms submitting information will need to:

  • be careful to selectively mark sensitive information as confidential - the PSR will assume anything not marked confidential can be published and will not accept ‘blanket’ confidentiality claims.
  • be aware that while confidential information is generally likely to be protected from disclosure, the PSR is empowered to share firms’ confidential information where it would assist it in performing its functions.

Anticipated timeline for the market review

Information gathering

June 2015 - July 2015: Request for information issued to current and potential IAPs

July/August 2015: Survey of indirect PSPs

August 2015: Receipt of responses to request for information and follow-up discussions


August 2015 - September 2015: Further details on the questions and issues being considered during the review published

August 2015 - November 2015: Bilateral meetings, roundtables or workshops with stakeholders

Interim report consultation

December 2015/January 2016: Publication of interim report for consultation

February/March 2016: Interim report consultation closes

Final report

December 2015/January 2016: Publication of interim report for consultation

February/March 2016: Interim report consultation closes


May 2016 – September 2016: Formulation of and consultation on any proposed remedies/actions

October 2016: Notification of decision on remedies/actions to be published