Banks should sell their stake in UK payments infrastructure to help increase innovation and competition, a new report suggests.
The recommendation follows the Payment Systems Regulator (PSR) market review into the ownership and competitiveness of the infrastructure that supports the payments systems: Bacs, Faster Payments System and LINK.
These payment systems are currently owned by a relatively small number of banks, which also control the single infrastructure provider that they rely on to process payments, VocaLink.
In the UK, VocaLink processes over 90% of salaries, more than 70% of household bills and almost all state benefits. Nearly every business and person in the UK uses its technology and last year the company processed over 11 billion transactions with a value of £6 trillion.
The PSR said the evidence indicates that the common ownership of this infrastructure provider by this small number of banks is having a negative impact on innovation and competition in the industry. The PSR is now proposing that these banks sell part of their stakes in VocaLink in order to open the market and allow for more effective competition and innovation.
Hannah Nixon, managing director, PSR, said: “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.
“There needs to be a fundamental change in the industry to encourage new entrants to compete on service, price and innovation in an open and transparent way.
“Our proposals will increase competition and create more opportunities for challengers, fintechs and other organisations looking to enter the market. This will create the conditions for greater innovation – which is in the interests of those that use the infrastructure services directly, and the UK economy as a whole.”