The Faster Payments Service introduced in 2008 is responsible for processing £100 million worth of payments per month, but this is restricted to just 10 established high street banks. Banks may soon be unable to hold onto this monopoly, however, after an announcement made by the Payments Systems Regulator who are looking to level the playing field and break open the money transfer systems controlled by high street banks.
Following the publication of the white paper ‘A Vision for a New Access Model’ in December 2014, Nick Caplan, Independent Chairman of Faster Payments, stated:
“Our aim is for our world class service to be available to as many end users as possible from any of the financial organisations they choose to use. We believe our New Access Model will benefit both Payment Service Providers and technology suppliers by extending participation opportunities.”
This change will see the marketplace open up to challenger banks and FinTechs looking to take advantage of the new access model, allowing them to get a direct connection to the Faster Payments network.
Organisations that are not currently on the network will be able to gain access rather than having to maintain their relationship with an agency bank, meaning that they can pass on cost-savings to make them more competitive; something that the existing members need to be ready for in this changing financial landscape. The 10 high street banks will need to embrace digital solutions to secure their position in the marketplace to be able to compete with smaller, leaner financial institutions once this takes off.
The FinTech boom in the capital is already making the UK a pioneer in improving the way in which payments are made and these organisations are leading the way in transforming the digital banking landscape. The announcement from the Payment Systems Regulator allows for greater collaboration; a community ethos that is already championed in the FinTech sector.
By introducing competition to the marketplace that enables businesses to extend their value chain while improving cost efficiency and transparency, modern banking practices are set to be redefined by challenger banks and FinTechs. As the FinTech disruptors grow and adapt to the changing market, evolving business demands and new regulations, I firmly believe we are going to see some major changes taking place in the payments industry. FinTech businesses will undoubtedly disrupt the playing field, but an element of competition is healthy, and ensures the customer gets the best and most efficient service.
Non-banks as a whole may eventually overshadow the traditional banks in terms of market share, simply because imagination and technological innovation will be the only limits to the number of different services these new providers can offer. And banks will simply not be able to compete.