A group set up by the Payment Systems Regulator (PSR) and Bank of England has recommended that the operators of three payment systems – Bacs Payment Schemes, Cheque and Credit Clearing Company and the Faster Payments Scheme – be merged into a single entity to boost competition in the payments and banking industry.

“The consolidation aims to further develop the capability and capacity of the operators by bringing them within a single organisation and reduces the complexity and costs of having three separate retail payment system operators (PSOs),” the regulators said in a statement.

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The new single entity will be responsible for taking forward the next stage of the development of the New Payments Architecture (NPA), an industry-led initiative that aims to boost competition across the payments and banking industry.

However, the recommendation now needs to be reviewed and agreed by the boards of the three operators. The consolidation is expected to be substantially completed by the end of 2017.

PSR managing director Hannah Nixon said: “It was the work of the Payments Strategy Forum that identified the opportunity presented by consolidating these payment system operators. Working to a tight deadline, the Delivery Group has produced a high quality report that sets out a compelling approach to deliver the new PSO which should support the Forum’s vision.

“’The consolidation would be an important first step towards a generational change in UK payments. It can help facilitate the safe and secure transition to, and management of, a New Payments Architecture (NPA), which we believe could deliver more dynamic competition and innovation in payments. Consumers will also benefit from new entrants coming into the market and offering users of payment services new, innovative products.”

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Bank of England director of financial market infrastructure David Bailey said: “Consolidation has the potential to deliver important financial stability benefits, including by delivering a new entity that is greater than the sum of its constituent parts and well placed to meet the high supervisory expectations the Bank has of a systemic risk manager. As such, we welcome the report, and look forward to seeing its recommendations taken forward in a way which promotes an orderly and smooth transition.”