Faster Payments is changing the payments landscape in the UK and worldwide

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Changes to UK Faster Payments

There are significant moves to open up the Faster Payments Scheme (FPS) to a much wider range of banks and Payment Service Providers (PSPs) over and above the ten “Direct Members”. This is due to regulatory pressure, tensions within some of the direct member banks, expectation of increased traffic and the expanding requirements of Corporates.

Currently there are major barriers to entry to small or challenger banks should they wish to become members of FPS. These are primarily the high cost of technical access to the scheme and the need for significant collateral to be held in the event of bank failure and other requirements of the Bank of England. Moreover, it would not presently be possible for a non-bank PSP to be part of the scheme as it is currently configured.

Very recently the scheme has addressed many of these barriers in response to The Payments Systems Regulator, and UK government, who want to create a level playing field for the provision of payments services in the UK financial services industry.

One key aspect of these changes is the introduction of a new set of access capabilities by the Faster Payments Scheme. These will be through Aggregator Gateways. It is envisaged that these gateways will be provided by FinTech companies and will enable lower cost access for PSPs and for challenger banks.

The scheme has invited Fintechs to sign a “Letter of Commitment” to support these proposals. By October 2015 ten companies had done so, although we believe some are more commited than others.

Recently the scheme commissioned a study which estimates that this new opportunity has a total NPV of £200m from 2015 to 2020. The actual profit potential for new providers could actually be higher than this.

The opportunities will not only be a share of the £200m NPV, but would also come from the provision of other services arising from its ownership of one of the gateways.

However there is a significant amount of work to be done to take full advantage of these proposals for FinTechs and Banks or PSPs. It is a good business opportunity, but as always with risks, challenges and complexity.

Benefits of using Mackman Associates

Mackman Associates has extensive knowledge of the Faster Payments Scheme and the issues it currently faces. We have access to FPSL (Faster Payments Scheme Ltd) documentation and plans — and to key industry players.

Our knowledge of Faster Payments stems from our close association with banks, industry bodies and FinTechs since the beginning of the scheme through to the current day.

Our capabilities will enable FinTechs or PSPs to rapidly and confidently assess this opportunity, to understand the risks and to be sure their plans are adequate. Our team can offer extensive experience of business planning, payments services, proposition design and sales enablement. We can assess the market, the players and your plans to aid sound decision-making.



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