Out-Law / Your Daily Need-To-Know

Out-Law News 2 min. read

Common standards needed to open up access to payment systems, says industry report


Payment systems should conform to the same technical standards, rules and practices to enable more payment companies to gain access to those systems, payment service providers (PSPs) have said.

Payments industry body Payments UK has published a report on open access to payment systems for payment providers (11-page / 1.35MB PDF) in which it said that many PSPs regard having access to UK payment systems, and global payment card schemes, as a "necessity".

However, in its report it highlighted that existing payment systems each have different rules, standards and means of settling transactions amongst other "unique characteristics that continue to evolve separately", meaning PSPs "may find themselves investing more than once to achieve a similar outcome".

"For some PSPs, especially smaller ones, the need to understand, navigate and adhere to similar but different scheme rules, standards and technological requirements can be demanding on their resources and management," Payments UK said.

PSPs want "common technical standards, rules and practices" across payment systems, Payments UK said. "Simplifying governance, messaging and technical standards, rules, technology and settlement arrangements" would help attract innovative payment companies into the UK market, it said.

"For new entrants into the UK market, or existing indirect participants of the current landscape, a simplified model would make joining and ‘plugging in’ to the system easier," Payments UK said. "It would mean much more consistent rule sets or even potentially one common rule set for all of the products and services that the PSP wished to access."

"It would also mean one set of standards, one technical access model and finally the potential to simplify settlement even where the PSP is using more than one product. This would create an optimum platform for PSPs, acting as an enabler for them to focus on offering customers the widest range of products or services," it said.

However, the payments industry as a whole would need to come to "collective agreement" on how to deliver open access to payment systems, the timings for change and funding arrangements, Payments UK said. A further challenge would be in drawing up a transition plan and managing the shift to "a simplified model", it said.

A wide range of stakeholders, including infrastructure developers, payment schemes, banks and regulators would need to collaborate to "deliver the common elements of an open access model". This might be challenging since those with an interest in the payments market are "diverse", may be in competition with one another and because the payments market is "divergent" in nature, it said.

"Not only would further simplification of access arrangements support competition, it would provide a platform to support innovation, which would directly benefit customers," Payments UK said in its report. "This capability would also facilitate the increased use of common messaging standards that would yield benefits domestically but would also support interoperability for UK customers on the global stage."

Banking and payments law expert Tony Anderson of Pinsent Masons, the law firm behind Out-Law.com, said there are three main issues which will need to be addressed to enable open access to UK payment systems.

"The three things are: achieve consensus among payment participants as to what the new payments infrastructure will look like as well as determining which parties are to be involved in this process; ensuring financial stability within payment systems via adopting the appropriate entry criteria for payment participants including liquidity/capital requirements where required; and determining who will fund and by what proportion, the development of the necessary changes to the UK’s existing payments infrastructure to enable open access to occur," Anderson said.

The UK's Payment Systems Regulator is currently conducting a review into the ease with which some PSPs, indirect PSPs (IPSPs), can get access to important payment systems through the banks that have direct access to those payment systems, indirect access providers (IAPs). It published an interim report in March.

Payments UK has developed a voluntary code of conduct to govern indirect access to payments systems. Barclays, HSBC, Lloyds Banking Group and RBS have subscribed to the code.

We are processing your request. \n Thank you for your patience. An error occurred. This could be due to inactivity on the page - please try again.