Last year, interbank payment systems processed over £74 trillion worth of payments, or the equivalent of 42,000 payments per minute. A market review carried out by the Payment Systems Regulator (PSR) reveals that UK’s payments infrastructure may be stagnating due to a lack of competition, calling for an urgent need for reform.
The organisation’s market review revealed a lack of effective competition in the procurement exercises for the provision of Bacs, Faster Payments Service and LINK, suggesting a barrier to entry for newcomers.
“As it stands, the current system is not adequate and we need to see a change. There is not one single area of concern, but a series of issues that are entwined and require a holistic approach in order to see them resolved. The remedies we are considering are packaged to achieve just that,” Hannah Nixon, managing director of the PSR said.
Nixon called for “future-proofing” the payments system to include new entrants in the market to boost innovation and efficiency, suggesting that the four largest banks which have common control of the payment systems operators and the infrastructure providers should sell all or part of their stake in VocaLink.
In the UK, VocaLink, recently acquired by Mastercard, processes over 90 per cent of salaries, more than 70 per cent 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.
If the big four give up part of their stake in VocaLink as per the regulatory recommendations, fintech firms could see a huge opportunity for growth.