Britain is likely to see an increase in the number of Payment Service Providers in 2018.
In a move designed to boost the growth of fintech companies, Britain’s central bank, the Bank of England has widened access to Britain’s interbank payments system to new fintech firms, an area that was previously dominated by the “Big Four” high street banks.
Although the central bank had flagged the plans in May itself, it published a detailed framework to enable the change as an increasing number of consumers are using mobile banking systems to pay bills or shuffle money between countries.
The BoE’s plan allow for new payment firms, including those that offer prepaid online mobile accounts, prepaid cash cards, remittance companies and foreign exchange service providers, to have access to its “real time gross settlement” or RTGS payments system.
“This should support financial stability through greater diversity and risk-reducing payment technologies,” said Mark Carney, BoE’s Governor in a statement.
The changes are likely to come into effect in 2018 once legislative changes that sanctify their operations become law.
This could be significant since it will reduce dependence on banking systems and will provide competitors access to payment systems, in turn allow them to provide a wider range of payments services, said the BoE in a statement.
In January 2018, updated European Union payments rules will also enable payment service providers, (PSP) to compete with banks.
Currently more than fifty banks and building societies have settlement accounts with the BoE’s RTGS system while nearly 450 non-bank PSPs are authorized to access BoE RTGS system by Britain’s Financial Conduct Authority.
In the wake of Brexit taking toll on its economy, Britain is trying to maintain its competitive edge in nurturing fintech firms, which are largely seen as a source for the creation of jobs.
Before a PSP is allowed to tap BoE system, it will have to demonstrate it can comply with BoE’s new framework for risk management. It will also have to demonstrate that anti-money laundering checks are in place and that customer money will be safe.