PSR has published its interim report for its market review into the ownership and competitiveness of the infrastructure that supports the UK’s payment systems Bacs, Faster Payments System (FPS) and LINK. PSR finds that there is no effective competition for the provision of UK payments infrastructure for these interbank payment systems. In the UK, VocaLink processes over 90% of salaries, more than 70% of household bills and almost all state benefits. PSR has now published its initial findings and proposed remedies for this lack of competition.
Provisional findings include:
- there is scope to improve competition in the provision of infrastructure services through competitive procurement processes;
- the common ownership and control of payment systems at both operator and infrastructure provider level have an impact on competition and the speed of innovation in the industry;
- LINK and VocaLink are currently not legally separate entities and the contractual agreement for core services is between VocaLink and 38 payment service providers in LINK, which makes it difficult to change provider; and
- the UK payment systems’ unique messaging standards are acting as a barrier to entry for new infrastructure providers into the UK market.
PSR’s proposed remedies include:
- competitive procurement processes for the provision of infrastructure services, which are clearly defined, transparent and independently audited;
- potential divestment by banks of their interest in VocaLink;
- measures that ensure the separation of LINK from VocaLink; and
- a common international messaging standard adopted for Bacs, FPS and LINK.
Feedback is welcomed up to 21 April. (Source: PSR publishes interim report on infrastructure provision)