With increased access to the UK’s Faster Payments a regulatory priority to help new challengers, a new deal has been reached that will change in which the settlement procedures are carried out. According to the deal, there will be a new ‘pre-funding’ settlement model which will remove some potential barriers around shared credit and settlement risks.
Today, the Faster Payments system has 11 participants that connect directly to the service, while a further 400 PSPs link up indirectly through sponsor banks. According to the new deal, all PSPs participating within the Faster Payments system will leave a cash deposit with the Bank of England. The deposit must be sufficient to cover the PSP’s net transactions between settlement windows in order to reduce the risks of financial contagion.
Commenting on the deal, Craig Tillotson, chief executive of Faster Payments said,
“Access to Faster Payments is a vital part of any challenger bank’s proposition – our introduction of a simpler settlement system is another big step forward in maintaining a stable financial system and supporting greater competition in banking.”
With a greater volume of transactions running on the Faster Payments system every year, the importance of the real-time network cannot be overlooked. While the 11 main participants will be upset over losing their central status, the move to allow PSPs more access will only improve the UK retail banking and payments landscape by ensuring greater competition between participants.
Overview by Tristan Hugo-Webb, Associate Director, Global Payments Advisory Service at Mercator Advisory Group
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