The Bank of England has announced plans to offer access to central bank settlement accounts to non-banks. Payments industry lobbyists have been campaigning for this for some time and this announcement, although it will take some time to be put into effect, comes sooner than expected. Anna Milne writes
Currently, non-banks and small PSPs access the UK’s payments systems via larger banks, paying high rates and subjecting themselves to the constraints and risks of legacy systems.
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This is great news indeed for non-banks and PSPs and answers the Payment Systems Regulator’s objective to promote competition. (Its mandate is to "promote competition, innovation and the broader interests of service users".)
Rich Wagner, CEO of APS Financial himself marked the development as "truly the ‘Holy Grail’ when it comes to access for alternative finance providers".
A report earlier this year, penned by Wagner in his role as chairman of the Emerging Payments Association, suggested an interim solution, until such time as his (and others’) efforts in lobbying the Bank of England for access to settlement accounts at the central bank for non-banks paid off. Said solution was termed Direct Agency and was to replace the current Indirect Agency model. The ideal, lest we forget, is of course Direct Access, which has now been granted.
However, obviously there is still a long way to go. For starters need to wait until it is actually implemented. We also need the challenger banks who offer nifty innovative digital budgeting services, such as Mondo, to actually acquire a banking licence. I would go further and argue that banks should not be allowed call themselves a bank until such time as they actually have a licence, shining a light on what the main customer-facing difference is- that a licence protects customer deposits up to £80,000.
Where another real argument for competition comes into play, is in the argument for the payments systems themselves to be updated. Faster Payments is all well and good but Direct Debits (DD) are almost 50 years old, 48 to be exact, and do not serve much of the population and small businesses at all well. Those on irregular or low income often choose to use cash if they cannot guarantee funds being available at a given time each month. Therefore they miss out on electronic payment benefits, such as DD discount.
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By GlobalDataAt least the conversation has not only gained momentum of late but has delivered significant developments to open and improve the landscape for all stakeholders (even the banks). And while there is still a long way to go, the different debates and developments do seem to be converging on a payments ecosystem that serves all parties better.
