UK Faster Payments scheme sets out to expand reach
Faster Payments plans to work with the Bank of England to broaden access to payments
Faster Payments, the UK payment clearing system, is planning to expand access to more payment service providers in the coming year. The organisation has set out its plans in a new Whitepaper, which explores possible cooperation with the Bank of England to develop new settlement models for non-bank payment service providers.
The move is part of a drive by Faster Payments to increase its reach and improve the payments system in the UK. Central to the plan is to develop a new access model, which basically involves getting new players involved in the Faster Payments scheme.
Obstacles to broader uptake identified by the paper, Faster Payments – A Vision for a New Access Model, include the fixed cost of communication links between the PSPs and the central infrastructure, which impacts smaller players the most; lack of IT resources at PSPs; the need for 24/7 operations; assurance requirements, challenges in obtaining a banking licence, sponsorship and the requirement for collateral to guarantee settlement.
In response, the organisation has set out a new access model, which aims to promote competitive aggregation services that will make it easier and cheaper to join the scheme. According to Faster Payments, the new access model will meet increased demand from the client base of smaller payment service providers for immediate, real-time payment services by being more cost effective compared to the direct participation model.
“By aggregating demand from multiple PSPs seeking access, accredited suppliers would be able to share the fixed costs of build and operation over a larger volume of payments and concentrate operational skills into critical mass bundles,” said the Whitepaper. “It is anticipated that these competitive aggregation services could equally be exploited by PSPs that wish to settle directly at the Bank of England, as well as PSPs that either do not wish to or cannot settle at the Bank.”
The other benefits claimed by Faster Payments for its new access model are that it will benefit existing members of the Faster Payments scheme that are looking to update their services to take advantage of new technology, and benefit new market entrants by giving them more innovation and choice in payment services. It will also provide infrastructure providers with opportunities to engage with new clients in the UK market, be a first step into all clearings where no pre-existing access service is in place, and be used in other non-UK markets once these begin to adopt real-time services.
By the end of next year, the scheme’s goals are to have FinTech vendors poised to launch the new access model, each vendor to have an anchor tenant, accreditation service for vendors to be launched, and a pipeline of additional payment service providers working with vendors. By the end of 2016, it plans to have a competitive market of FinTech vendors fully connected and accredited into the scheme and a dozen new PSPs using existing and new settlement models.
Faster Payments was launched in 2008 as a near real time payment clearing system. It is currently processing near 100 million payments per month, and recently processed its four-billionth payment.
