While having direct access to the U.K.’s real-time transaction network might not lower costs for non-banks, it will allow providers to make their own risk decisions.

The U.K.'s new Payment System Regulator (PSR) is expected to push for direct access to the country's payments infrastructure, including the Faster Payments System, which provides for real-time payments processing.

Rich Wagner, founder and CEO of Advanced Payment Solutions, a London-based payment and prepaid card gateway, is a proponent of the move, though not for financial reasons.

“I am certainly not doing this for costs savings...because the absolute costs saving is immaterial. I’m doing this primarily for the ability to have control over my own destiny, over my own regulatory and governance framework” said Wagner, who also represents the electronic money industry on the Euro Retail Payments Board.

The PSR, which officially launched on April 1 is an independent regulatory body that was set up by the Financial Conduct Authority (FCA). The group is made up of regulatory leaders with backgrounds outside the payments space.

According to the PSR’s consultation paper which was published in November, “We intend to open up the payments industry, making it easier for a wider range of parties to access payment systems, and compete and innovate around them.” The PSR’s recently published policy statement echoes this sentiment.

One of the first businesses getting the third degree by the PSR is VocaLink, a bank and building society-owned company which runs and manages BACS, the LINK ATM network and the Faster Payments System.

Non-banks currently must be connected to a bank to use these payment rails. Advanced Payment Solutions works with NatWest, the largest retail and commercial bank in the U.K. The relationship isn't dissatisfactory, said Wagner, but if his company had direct access to the payments rails he could eliminate that relationship.

A third party payment provider such as Advanced Payment Solutions gets charged 10 to 15 times more per transaction to hook into the Faster Payments rails than the banks with direct access pay, Wagner said. But the price is fair since the bank is subject to third party risk and is heavily scrutinized by regulators, he said.

If third parties were to have direct access, the expense would be similar because these companies would have to spend more on transaction monitoring tools and compliance people, said Wagner.

But there would be benefits. The way access is structured now, Advanced Payment Solutions “might not be able to work with some customers, because our agency banking partner doesn’t think it’s good to do so,” Wagner said.

Advanced Payment Solutions is willing to work with a wider range of clients than its bank. The bank is “not giving us the flexibility to make that decision by ourselves while still staying in compliance...which disadvantages small- to medium-sized enterprises and consumers.”

Advanced Payment Solutions works with very small businesses, such as cleaners or plumbers that banks often avoid because they don’t bring in enough return on investment. Advanced Payment Solutions also wants the option to work with payday lenders and remittance providers, which banks have avoided because of reputational risks and intense regulatory oversight. Banks “don’t have the time, energy or return on investment to look into these clients,” said Wagner. But there are payment providers that have been compliant for a number of years, such as Advanced Payment Solutions that could service the good quality businesses in these areas and make money, he said.

The first phase of the PSR’s restructuring of the payments system will likely be giving access to the non-clearing banks, such as Virgin Money UK, owned by Richard Branson’s venture capital conglomerate, Virgin Group; Metro Bank Plc; and Tesco Bank, owned by the U.K. supermarket chain, Tesco Plc. The PSR did not respond to requests for comment. 


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