The UK’s biggest banks look set to lose their hold over the payment system, as the Treasury revealed plans to set up a new regulator in a bid to foster competition.
The changes could come into effect as early as 2015, with the new Payment Systems Regulator being established under the UK’s Financial Conduit Authority.
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In a statement the Treasury said: "The government wants the new regulator to help remove the barriers for new entrants, increasing competition, incentivising all market participants to improve services and reducing fees for consumers".
Currently, smaller institutions must pay if they wish to access the payment system run by the UK banking system’s major players.
According to the Treasury, these banks hold the power to impose fees and block access to the service, imposing de facto barriers to entry over their lesser and younger competitors.
The Payment Systems Regulator will hold the power to level the playing field by changing how the existing payment system operates, increasing access to it by small banks and imposing fines on financial institutions that fail to obey the rules.
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By GlobalDataSajid David, financial secretary to the Treasury, said: "An open and transparent payments system is crucial to give new players freedom to challenge the big banks without unfair barriers".
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