UK Payments regulator orders banks to sell VocaLink
(26 February 2016 – United Kingdom) Britain’s largest banks have been ordered to sell VocaLink, the company they own jointly and which runs much of the country’s payments infrastructure, in deal which could be worth £400 million (A$774 million).
A consortium of 18 banks, including HSBC, RBS, Lloyds and Barclays, own the company.
VocaLink manages payments services for banks, including Bacs, Faster Payments and Link cashpoints, in addition to mobile app Zapp.
However, the Payment Systems Regulator (PSR) says the system is unfair and has ordered the banks to sell off VocaLink. It believes the current set up reduces innovation and competition in the industry.
The PSR’s interim report on the state of the sector found that a lack of competition means costs are simply passed onto banks and their customers, with little pressure to make the system more efficient.
PSR’s managing director Hannah Nixon said: “We think the fact that a small number of big banks own and control the infrastructure and the operating systems is getting in the way of innovation and competition, and that has an impact on the end user, ultimately.”
“Everybody and every business uses these systems and it is really important this infrastructure works well. Our finding is that at the moment it is okay, but because of the ownership, competition and innovation are being hampered and that gets in the way of new banks and innovative service providers entering the market.
“That effects the choice we all have of payment providers, which affects their quality and price.”
The regulator also wants VocaLink to implement more standardised technology and systems, reducing barriers to entry for other companies
VocaLink said of the announcement: "We note the PSR's interim report released today. We look forward to working with the PSR to ensure that the proposals are pragmatic and effective for all participants. VocaLink is committed to supporting a competitive and innovative payments industry.”
According to reports, VocaLink processes more than 90 percent of salary payments in the UK, over 70 percent of all household bill payments and almost all state benefits – totalling 11 billion transactions per year with an estimated value of around £6 trillion.
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