The interim report of the Payment Systems Regulator deriving from their Market Review on Infrastructure provision has been issued.
Vocalink is the infrastructure behind all of Faster Payments, BACS and LINK, so it handles all ATM transactions, all standing orders, credit transfers other than very high-value ones, and direct debits.
The PSR has proposed – because its findings are subject to consultation – that the major banks should no longer be shareholders in Vocalink, or indeed any competitors that may emerge in that layer of payment service provision. The PSR has also proposed that Voca de-merge from LINK, a merger that was arranged in the noughties, and resulted in the building societies – which has been shareholders in LINK – to lose their direct say in the running of Vocalink.
This lack of a voice at the table for the smaller financial institutions (as well for numerous other groups) has been a theme in the PSR’s deliberations since its launch.
The incumbent banks can act as Payment Service Providers in their own right, and as shareholders in the payment system operators, subject to certain rules to avoid conflict of interest, and to foster openness and clarity of joining rules.
But the incumbent banks will not be allowed ownership of the provision of the infrastructure used by the payment system operators, which are as known as “payment scheme companies” and are the likes of Faster Payments Limited and CHAPS Clearing Company Limited.
Now we await the outcome of the PSR’s other Market Review – on Access, meaning the direct or indirect access available (or actually not really available) to financial institutions into the payment systems themselves – BACS, CHAPS, FPS, LINK, Cheque&Credit, Visa and Mastercard. Under the broad heading “financial institutions” come the categories of credit institutions (Challenger Banks, foreign banks, building societies and so on) as well as the niche categories of Payment Institution and eMoney Institution.
This Market Review on Access goes at the payment scheme companies more directly, and will likely confirm that they cannot run their infrastructure (compelling Visa to move to Voca model) and insist on the kind of access rules that will be mandatory under Payment Services Directive 2 anyway, for which the PSR is meant to be the “competent authority”.