Why does the Bank of England now allow non-bank payment service providers to access payment schemes directly?
The UK is a world leader in payments innovation, which is reflected in the dramatic growth in the number of UK-authorised non-bank Payment Service Providers (<a href="/glossarycollection/payment-service-provider" style="color:#48277C;" target="_blank" title="Payment Service Provider"><u>PSP</u></a>). These institutions are competing with banks to provide payment services. However, until access to settlement accounts was extended, they were only able to access the UK payment schemes indirectly – through the very banks they are competing with.<br/><br/>
The Bank allows non-bank PSPs to open settlement accounts, subject to appropriate safeguards. This means they can meet one of the key entry criteria to become a direct settling participant in UK payment schemes that settle at the Bank.<br/><br/>
Access to the UK’s main payment schemes allows non-bank PSPs to compete on a more level playing field. They will be less dependent on competitors and will be able to offer a wider range of payment services. These factors all help to increase competition and innovation in the market for payments.<br/><br/>
Longer term, the innovation stemming from expanded access should promote financial stability by:<br/><br/>
∙ creating more diverse payment arrangements with fewer single points of failure;<br/><br/>
∙ identifying and developing new risk-reducing technologies;<br/><br/>
∙ expanding the range of transactions that can take place electronically and be settled in central bank money.<br/><br/>