Out-Law / Your Daily Need-To-Know

Consolidate three major UK payment system operators, says industry expert group

18 Jul 2016, 10:51 am

Three of the UK's major payment systems should be consolidated and run by a single operator, a group set up by the Payment Systems Regulator (PSR) has said.

The Payments Strategy Forum (PSF) recommended consolidation of the Bacs, Faster Payment Service, and Cheque and Credit Clearing Company (C&CCC) in a new draft strategy (80-page / 2.90MB PDF) it was tasked with devising by the PSR to help "unlock competition and innovation in payments".

A consolidation of the three payment system operators would "act as the springboard for the new payments architecture emerging in the future, and would enhance and accelerate the benefits that are to be achieved from our other initiatives", the PSF said.

Those other initiatives include a move towards "universal adoption of internationally recognised messaging standards ISO20022 and the development of common governance for the APIs that act as the glue holding together the payments architecture and would provide the ability to send more data with payments", it said.

"We recommend a new payments architecture is built on new technology, so that in future, when new needs arise, the system will be agile and respond more quickly and efficiently," the PSF's proposals said. "This new structure will utilise End User Application Programming Interfaces (APIs) and Open Access APIs to simplify connectivity and provide the framework for innovation."

Consolidation of the payment system operators would address problems identified by businesses in the payments industry that have said that "multiple payment systems are unnecessarily complex, time consuming, and costly … to join and participate in", the PSF said.

Those issues serve as a barrier to 'direct entry' to payment systems for payment service providers (PSPs) and negatively impacts on competition, the PSF said in its draft strategy, which also identified that PSPs currently have to "undertake work which is likely to be duplicated across the separate payment systems". It described this as "inefficient".

The PSF said that consolidation of Bacs, Faster Payment Service, and C&CCC would in time lead to the "integration" of the three rulebooks that govern them. It said consolidation would also "provide a more strategic and joined-up approach to the development of the retail interbank payment systems".

"One of the objectives of the [single] entity would be to deliver increased interoperability, which should improve systemic resilience and potentially enhance competition in the downstream retail market," the PSF said.

The PSF's proposals are open to consultation until 14 September.