The Payment Systems Regulator (PSR) was established to promote effective competition and innovation in payment systems.
Ensuring open access to participants and potential participants is a key component of this. The PSR’s open access programme has been a cornerstone of its work and is now delivering meaningful results for service-users.
Over the last year the PSR says it has seen evidence that the payments industry’s work to open up access has benefited service-users, although more can still be done. The Access and governance report on payment systems explains what has changed. It also sets out further work the PSR expect to happen during 2017.
Access to payment systems remains a priority according to the report. This is because open access to payment systems is vital for the provision of competitive and innovative payment services. It can also facilitate more competition in retail banking, and payment service provision more widely.
Since publishing its last access and governance report in December 2015, the PSR notes that it has seen the following improvements in the provision of access:
- Choice: There has been a significant improvement in the choice of access options available to payment service providers (PSPs). The payment system operators have been working to make it easier for PSPs to become direct participants in payment systems. Direct participation in the interbank payment systems increased in 2016 and looks set to increase considerably throughout 2017. The PSR also expect the entry of three new firms providing indirect access to payment systems this year – ClearBank, BFC Bank and Raphaels Bank. This will give PSPs that choose indirect access a greater choice of indirect access provider (IAP).
- Time: The operators have improved their processes for new PSPs joining as direct participants, reducing the time and complexity of joining. For example, recent joiners, such as Metro Bank, have reported a very positive experience of the process for joining Faster Payments (FPS). This is particularly good news given that multiple new PSPs are in the process of joining FPS. We also expect that implementing the recommendations of the Payments Strategy Forum (the Forum) on simplifying access will further reduce the time and complexity of joining payment systems.
- Value: The cost of getting direct access appears to be reducing, or is lower than expected. In December 2015 the PSR reported that evidence gathered from PSPs projected the upfront cost of access could be in the range of £2.5 to £4 million. Recent joiners have indicated that upfront costs for accessing the interbank payment systems are in the region of £1.2 to £2.5 million. We also expect the new IAPs to increase competition in the provision of indirect access, which could lead to lower prices.
- Quality: For PSPs who choose indirect access, there have been improvements in the quality and availability of technical access to FPS. For example, two IAPs – Barclays and HSBC – are now offering ‘direct agency’ access to FPS. This allows PSPs to connect to the FPS central infrastructure directly, giving their customers the same quality and availability of access as direct participants. The PSR expect a number of the new IAPs to also offer this service later in the year.
- Engagement: The operators and IAPs have taken steps to increase transparency of information and to engage with service-users. For example, the operators have produced a joint guide intended to help organisations consider their access options for the interbank payment systems.
Although progress has been encouraging, the PSR says it wants the operators and IAPs to build on this success during 2017, pushing for the further necessary improvements.