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UK watchdog tells banks to open up payment system to competition

[LONDON] Banks should cut their stakes in one of Britain's core payments systems as part of a fundamental change to increase competition, Britain's Payment Systems Regulator (PSR) proposed on Thursday.

The UK payments network is a patchwork of infrastructure built over many years and the PSR was set up after lawmakers called on the government for changes after customers suffered a string of glitches.

The PSR said the VocaLink system, which processes more than 90 per cent of salaries, over 70 per cent of household bills and almost all state benefits, is owned and controlled by a relatively small number of lenders.

"The evidence published today indicates that the common ownership of this infrastructure provider by this small number of banks is having a negative effect on innovation and competition in the industry," the PSR said in a statement.

"As a result, the PSR is proposing that these banks sell part of their stakes in VocaLink in order to open the market and allow for more effective competition and innovation."

VocaLink processed over 11 billion transactions worth 6 trillion pounds last year.

The PSR will consult on the proposals until April 21.