UK central bank opens up RTGS access to non-banks
by Kylene Casanova
The Bank of England allows RTGS access for non-banks, ushering in a wider range of payment services, plus increased competition and innovation in the provision of payments services.
Non-bank payment service providers (PSPs) are now eligible to apply for a settlement account in the Bank of England's real-time gross settlement (RTGS) system, the UK's central bank has announced. This will give them direct access to the UK’s sterling payment systems that settle in sterling central bank money, including Faster Payments, Bacs, CHAPS, LINK and Visa.
According to the bank, this is part of a “much broader renewal programme designed to deliver a materially stronger, more resilient, flexible and innovative sterling settlement system for the United Kingdom in the years ahead”. Non-bank PSPs will in future be able to compete on a more level playing field with banks.
The bank's governor, Mark Carney, said that this should support financial stability through greater diversity and risk-reducing payment technologies. Before non-bank PSPs can join, the UK parliament needs to pass a number of legislative changes and non-bank PSPs will have to prove that they comply with the risk management framework. It's therefore likely that the first non-bank PSPs will join RTGS in 2018.
The bank said that this expanded access should promote innovation and financial stability in the following ways:
- creating more diverse payment arrangements with fewer single points of failure;
- identifying and developing new risk-reducing technologies; and
- expanding the range of transactions that can take place electronically and be settled in central bank money.
CTMfile take: Along with PSD2 and open APIs for financial services next year (see this article for more on the practical challenges of open APIs) there are important changes sweeping through the payments sector in the UK. The innovation that comes out of this will be interesting to see and the key question will be: how will banks adapt?
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