18 April 2018

Bank of England: First non-bank payment service provider (PSP) directly accesses UK payment system

The first non-bank payment service provider (PSP) has joined a UK payment system settling in central bank money. TransferWise, a Financial Conduct Authority-regulated PSP facilitating the international transfer of payments, is now a direct participant in the UK’s Faster Payments system.

A key component of this work involved the Bank extending settlement account access in its Real-Time Gross Settlement (RTGS) system to non-bank PSPs such as TransferWise.

In May 2018 the Governor spoke of the benefits new financial technologies could bring to end-users and in June 2016 he spoke of how they could support the Bank’s policy objectives. Wider access is expected to bring financial stability benefits through increasing the proportion of settlement in central bank money, diversifying the number of settlement firms, and driving greater innovation in risk-reducing payments technologies. It also has the potential to enable more efficient, effective and inclusive payments.

To safely enable access for non-bank PSPs to accounts in RTGS a new framework has been established. This framework consists of: supporting legislative change; a strengthened supervisory regime; and tailored operational arrangements in RTGS.

Allowing non-banks to hold a settlement account in RTGS is just one way in which the Bank and the wider UK regulatory community is broadening access to the RTGS system. In May 2016 the Bank set out a blueprint for a renewed RTGS service that will deliver a resilient, flexible and innovative sterling payment system for the United Kingdom to meet the challenges posed by a rapidly changing landscape.

With an increasing number of payments being made through the RTGS system, the Bank anticipates that widening access to CHAPS and payment schemes that settle over RTGS will help to increase competition and innovation in the provision of payment services.

This work also supports the objectives of the PSR and FCA in promoting effective competition and innovation in the market for payment services in the interests of consumers. In the longer term, broadening access will promote financial stability by increasing the range of transactions which settle in central bank money, and reducing the number of single points of failure.

Press release

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