UK Payment Schemes for Non-bank Payment Service Providers

The UK is a world leader when it comes to fintech innovation. This leading role can be seen particularly in relation to payment innovations. As a result, there has been a dramatic increase in the number of UK-authorised payment services providers. These provide direct competition to banks to provide a range of payment services to individuals and businesses. 
 

Access to settlement accounts 

Until access to settlement accounts was broadened, these non-bank providers could only gain access to UK payment schemes indirectly. More often than not, this would be through the same banks with whom they were competing. 

The Bank of England now allows non-bank payment services providers to open settlement accounts. This allows them to provide a better service to their clients and compete on a level playing field with the banks. Settlement accounts enable non-bank PSPs to meet one of the key criteria for becoming a direct selling participant in UK payment schemes that settle at the bank. 
 

Which non-bank payment services providers are eligible? 

Currently, there are two types of non-bank PSPs that are eligible for direct selling to UK payment schemes. These are e-money institutions and payment institutions. Only institutions in both categories that are properly regulated by the FCA and the HM Revenue and Customs are eligible. 

Only authorised institutions are eligible to hold settlement accounts at the Bank of England. In effect, this means that smaller e-money institutions and payment institutions that are registered but not authorised are unable to hold an account. As a result, they’re not eligible for direct settlement access to UK payment schemes. 

What are the UK payment schemes? 

There are a range of UK payment schemes providing a variety of different payment services. Non-bank PSPs may want to access one or more of the following:

●     CHAPS - this is the UK’s same-day payment system. It’s most commonly used to make instant retail payments and for wholesale purchases.

●     Faster Payments (FPS) - this provides real-time payments around the clock, seven days a week. It’s commonly used for single immediate payments, standing orders, return payments and forward dated payments. It’s also used for internet, telephone and mobile payments.

●     BACS  - this is the automated clearing house that processes direct credits and Direct Debits payments across three working day cycles.

●     Image Clearing System - This allows banks and building societies to exchange images of cheques between themselves for clearing and payment.

Why does the Bank of England allow non-bank payment services providers to directly access payment schemes? 

By allowing non-bank PSPs to access payment schemes, the Bank of England is backing innovation and competition in the payments market. It’s partly in response to the blossoming market in non-bank PSPs in the UK and the role that fintech innovation plays in expanding the services available to end consumers. 

Over the long term, this financial innovation should help to promote greater financial stability as diverse payment arrangements have fewer single points of failure.  
 

Authorised and innovative payment services 

At Global Investment Strategy, we embrace innovation to provide UK and global payment services to our clients. Our UK regulator, the Financial Conduct Authority (FCA), granted Global Investment Strategy Ltd additional regulatory permission as an Authorised Payment Institution (API) under the Payment Services Regulations 2009 (PSRs).  

To find out more about our payment services, call +44 (0)20 7048 9400 or email info@gisukltd.com.