We have published the final findings of our market review into the ownership and competitiveness of infrastructure that supports the three major UK payment systems: Bacs, Faster Payments Service (FPS), and LINK.

In summary...

We have found that there is no effective competition for the provision of UK payments infrastructure for the three interbank payment systems.

This report outlines our final findings and potential remedies. We are seeking feedback on the remedies we are considering by 22 September 2016.

We have produced a factsheet that summarises the findings and proposed remedies contained within the final report.

Note: where you see a 'scissors' icon in the final report, it represents content that has been redacted.

What is payment systems infrastructure and why is it important?

The payment systems infrastructure is the hardware, software, secure telecommunications network and operating environments that supports the clearing and/or settlement of a payment.

Well-functioning payment systems contribute to the country’s economic productivity by reducing the costs of transactions, improving financial markets’ liquidity and enhancing the financial sector’s stability. It’s important that infrastructure services are reliable, efficient and deliver the best outcome for service-users.

Our final findings

The evidence we have gathered shows:

  • There is no effective competition for the provision of UK payments infrastructure for the three main interbank payment systems (Bacs, FPS and LINK).
  • The lack of competitive procurement exercises by the operators is a barrier to entry that prevents potential providers from competing.
  • The UK payment systems’ bespoke messaging standards are acting as a barrier to entry for new infrastructure providers into the UK market.
  • Because of the joint control that the four largest shareholder payment service providers (PSPs) exercise over both the operators and VocaLink, the current ownership and governance arrangements are likely to reduce the level of competition.

Our proposed remedies

In this final report we outline a package of three remedies which could address the issues we’ve found:

  • Competitive procurement exercises – there are a number of ways this could be implemented ranging from issuing guidance, through to requiring operators to follow a prescribed procurement process
  • Enhanced interoperability, including a common international messaging standard, for Bacs and FPS - a common international messaging standard for LINK may have unintended consequences and more limited benefits compared to Bacs and FPS. As part of our remedies design we will consider further whether such a remedy is appropriate also for LINK.
  • Divestment by the four largest VocaLink shareholder PSPs of their interest in VocaLink - we note that the acquisition of VocaLink by MasterCard could address the issues we have identified as causing a restriction of competition currently.

Next steps

We welcome your feedback on our proposed remedies.

You can share your comments with us by email at: infrastructurereview@psr.org.uk

The deadline for comments and responses is 5pm on Thursday 22 September 2016.

Additional information

On 21 July 2016 MasterCard announced that it intended to acquire VocaLink. Read our statement responding to the announcement.

As part of both our market reviews, in December 2015 we commissioned a report by Lipis Advisors. This provides a fact-based comparison of payment system ownership and access models between the UK and 12 other countries. Read the full Lipis report here.

You can also read the annexes to the final report.

Read the non-confidential responses (published 10 June 2016) to the interim report.

Read the interim report for this market review, published in February 2016, here.

Read the non-confidential responses (published 13 October 2016) to the final report

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