The Payment Systems Regulator (PSR) has published its review of competition in the supply of indirect access to payment systems, concluding that progress is being made into opening up access to payment systems. This work is generating increasingly positive results, according to the Indirect Access Market Review, which forms part of the PSR's initiative to help banks, building societies and other payment service providers (PSPs) to access payment systems.

Greater choice

In its statement, the PSR wrote that it is “already seeing positive progress in the supply of indirect access, with some banks announcing that they plan to offer greater choice to many PSPs by becoming an indirect access provider within the next nine months”.

The UK's recognised payments systems are (according to the Bank of England website): 

• Bacs (recognised 5 January 2010)
• CHAPS (recognised 5 January 2010)
• CLS (recognised 5 January 2010)
• CREST (recognised 5 January 2010)
• LCH.Clearnet Ltd (recognised 5 January 2010)
• Faster Payments Service (recognised 24 February 2010)
• ICE Clear Europe (recognised 24 February 2010)
• Visa Europe (recognised 19 March 2015)
• LINK (recognised 23 May 2016)

In March, the PSR issued an interim report into the supply of indirect access to payment systems and whether competition is working for service-users. This article explains how PSPs can have either direct or indirect access to interbank payment systems.

Concerns over compliance, technology and barriers to switching providers

The PSR's Indirect Access Market Review raises several concerns, including:

• some indirect access providers are less willing to offer access to smaller payment service providers such as money remitters, due to compliance requirements for financial crime regulation;
• the ability of current technical solutions for real-time payments to meet the required quality of service; and
• banks, building societies and other payment providers face barriers to switching indirect access providers.

VocaLink, the UK payment systems company, which has just been majority-bought by MasterCard, provides the underlying BacsTEL-IP infrastructure for Bacs, the switching infrastructure behind LINK and operates the infrastructure for the Faster Payments Service. The acquisition of 92.4 per cent of VocaLink by MasterCard denotes a changing strategy for the latter.  

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CTMfile take: indirect access to the UK's payment systems is changing the payments model and will open up the choice of payment service providers for customers (consumers and corporates), who will no longer have to use banks to make payments. This is an interesting industry initiative and corporate treasurers will benefit from keeping up-to-date with this development.