A report released Thursday from the U.K. Payment Systems Regulator (PSR) calls for reforms to the payments system, including a recommendation that the banks that currently own much of the infrastructure should sell their stakes to help increase innovation and to foster competition in the space.
Currently, the U.K. payment system is owned by a relatively small collection of banks, which also control the single infrastructure provider that the banks rely on to process payments, the PSR report notes. The provider processes over 90% of salaries, and more than 70% of household bills and almost all state benefits in the U.K. Last year, the company processed over 11 billion transactions with a value of £6 trillion (C$11.5 trillion), the PSR report notes.
The PSR report finds that the common ownership of this infrastructure “is having a negative impact on innovation and competition in the industry.”
“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,” says Hannah Nixon, managing director of the PSR, in a statement. “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.”
In addition to changing the ownership structure, the PSR report also calls for a new competitive and transparent procurement process, and for the introduction of a common messaging standard to level the playing field.
“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,” Nixon adds.
The PSR report was published today for consultation, comments are sought by April 21.