For the longest time, banks have held a monopoly position over infrastructure projects related to the payments sector. That situation is changing rapidly, as the UK’s Payments System Regulator has broken up the monopoly. Instead, they want third-party service providers to compete in the national payments infrastructure projects.
More Competition Among UK Payment Service Providers
It is always positive to see regulators take matters into their own hands, at least when they focus on innovation and competition. Although the UK payments infrastructure has multiple existing services competing with one another, more competitors are always welcome. Faster Payments and Link are the two reigning projects in the UK payments sector right now, but the regulator feels there is room for other incumbents.
In fact, the payments watchdog noted that there is far too much control of the sector in the hands of bank-controlled projects. It is never a good idea to put all of the power into the hands of a few players, and it is due time to breach the hegemony. Moreover, the regulator feels that it is time to embrace new common international messaging standards to encourage competitors to emerge.
Although shaking up the payments infrastructure will be a significant challenge, there is a plan in motion. New market entrants will have a slightly easier time to enter the market when using different technologies. This could spell good news for Bitcoin and blockchain companies looking for a UK expansion in the coming years.
Some people see this decision as a “generational step” to accommodate the needs and demands of younger users. Particularly the millennials remain well outside the grasp of established banks, and new players on the market can capitalize on this factor. A wholesale change is coming to the UK’s payment system, and everyone involved will need to bring their A-game moving forward.
UK Payment Systems Regulator’s Managing Director Hannah Nixon stated:
“The remedies we are putting forward today are another step in our strategy to bring about a once in a generation change to UK payments. This will promote more effective competition and innovation that will help better meet the needs of all users of payment systems — be they consumers, small businesses, or banks.”
For the time being, it remains unclear what this news means for fintech companies looking to enter the UK market. It appears that the regulator wants to lower the barrier to entry, which is a positive development. It remains to be seen, however, which companies will enter the market, as the Brexit may affect growth in the UK over the coming years.
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