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Big banks have too much control over customer payments


Big banks have too much control over the systems that allow customers to pay for things and should loosen their stranglehold on the market, according to the Payment Systems Regulator.

There is a complex infrastructure that facilitates payment methods such as Bacs and same day transfers between different bank accounts. However, this is owned by a small group of banks, and the regulator has claimed innovation in the industry is suffering as a result of this control.

The banks also own a system called VocaLink, which processes the vast majority of salary and state benefit payments in the UK. This system processes around 70% of household bills and last year alone, VocaLink processed 11 billion transactions worth around £6 trillion.

The Payment Systems Regulator wants the banks to sell their stakes in order to foster competition and innovation.

Innovation and competition

The regulator wants to encourage smaller banks that are new to the banking sector to offer services that are similar to the big banks. However, they do not feel this is possible while the sector is controlled by such a small group.

Hannah Nixon, the managing director of the Payment Systems Regulator said: "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."

A spokesperson for Payments UK – the industry representative for the owners of the current system, appeared to be receptive of the regulators comments. A spokesperson for Payments UK said: "Changes in technology, customer payment needs and an evolving payments industry makes the time right to review what is going to serve the UK's best interests in the future."

Harriet Baldwin, the Economic Secretary to the Treasury praised the regulator’s report by stating: "Today's report is an important step towards a more open payment system which will benefit millions of consumers and firms who rely on it for making payments‎ on a daily basis."

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