What is the process for a non-bank PSP to become a directly settling participant?

Non-bank Payment Service Providers (<a href="/glossarycollection/payment-service-provider" style="color:#48277C;" target="_blank" title="Payment Service Provider"><u>PSP</u></a>) interested in accessing the UK payment systems should first contact the relevant payment scheme to discuss access options and project scope, as well as viability of holding a settlement account for their business model.<br/><br/>

The payment scheme websites give specific and detailed information but the below summarises the general approach.<br/><br/>

Discovery<br/><br/>

The non-bank PSP should share initial information documents with the payment scheme and discuss the best option for access. Direct access may not be the best option for all interested non-bank PSPs. If this is the case, the payment scheme will be able to advise on alternative access models.<br/><br/>

If the non-bank PSP decides to pursue direct settling access, it will be asked to sign a non-disclosure agreement. This agreement provides protection to both the payment scheme and the non-bank PSP and enables more detailed discussions to take place, with supporting documentation. At this stage, the non-bank PSP can set up its project plan.<br/><br/>

Definition and Planning<br/><br/>

Once a non-bank PSP has agreed its project plan it will submit a ‘Letter of Intent’ to the payment scheme. At this point, the payment scheme will review the non-bank PSP’s plans and carry out its own risk assessments. If the payment scheme is happy to progress the non-bank PSP’s application, it will allocate a provisional on-boarding slot (working with the Bank). A predetermined number of these slots are made available by the Bank to the payment schemes each year. Payment schemes will work on a best efforts basis to work to a non-bank PSP’s preferred timeframe, but demand from other institutions may limit their ability to do so.<br/><br/>

A non-bank PSP will also need to have testing slots allocated with both the payment scheme and the Bank. The relevant payment scheme will coordinate this.<br/><br/>

There is not a separate application to the Financial Conduct Authority (<a href="/glossarycollection/financial-conduct-authority" style="color:#48277C;" target="_blank" title="Financial Conduct Authority"><u>FCA</u></a>) for the supervisory assessment. The Bank will meet with the non-bank PSP to understand more about their business model and how they intend to use their settlement account in RTGS. At the appropriate point, the Bank will inform the FCA that the non-bank PSP is ready to undergo the supervisory assessment.<br/><br/>

Design, Test & Settlement and Regulatory work<br/><br/>

At this stage, the non-bank PSP will have four concurrent but independent work streams:<br/><br/>

∙ Technical preparation for operating the settlement account, with the Bank;<br/><br/>

∙ Technical build to ensure that the non-bank PSP has the technical capability for direct access, with the payment scheme;<br/><br/>

∙ The FCA’s supervisory assessment;<br/><br/>

∙ Progressing membership/participation requirements, with the payment scheme.<br/><br/>

Assurance and Go-live<br/><br/>

The Bank will only allow the settlement account to go live:<br/><br/>

∙ If the firm is eligible for a settlement account;<br/><br/>

∙ If all required testing has been successfully completed;<br/><br/>

∙ Once it has received confirmation from the FCA (and, where relevant, HMRC) that it has no objections to the non-bank PSP opening a settlement account;<br/><br/>

∙ Once the payment scheme provides notification that it has conducted all of its own assurance work and is also content for go-live.<br/><br/>

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