My fourth trend in my earlier blog on the top 5 payments trends in 2015 was the opening up of the UK payment clearing market. This was in part driven by the Payment Systems Regulator, created in 2014.
The Payment Services Regulator took up the reins in 2015 following a year of engagement with industry and key stakeholders. A key focus for them was giving existing and new banks comparable access to the UK clearing systems. For example, a new bank in the UK would be forced either to invest heavily in back-office systems to connect to Bacs, Faster Payments, CHAPS and cheque clearing or to buy services in from its sponsor bank, a potential competitor.
The results so far have been an acceptance that undue obstructions to new entrants should be removed and a level playing field be created for all banking providers. This may mean that some new entrants share costs, which has been the case amongst credit unions, or buy services from independent banking service providers.
HM Treasury has also been instrumental in driving forward access to bank accounts using open APIs and some of us are eagerly awaiting the output of an industry working group on how to make this work and how to make it secure. This is also a topic picked up by the Payment Services Directive 2 which was adopted in November. This establishes the legal basis for “third-party providers” such as Account Information Service Providers and Payment Initiation Service Providers who can gain programmatic access to a client’s bank accounts to provide additional services such as personal financial management. It is not yet clear how the two initiatives will work together but it is likely that both will need to rely on strong customer authentication, another feature of PSD2.
Opening up payments is potentially a great benefit to clients but it will also benefit regulation. By establishing common standards and interfaces, this may help with another key initiative: increased competition in the consumer and business banking market.