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Digital banking 24 Jul 2017

Bank of England gives fintech businesses a helping hand

In a boost to the future of open banking, the UK’s Bank of England has widened access to the county’s interbank payments system enabling fintech firms to compete more effectively with the large incumbent banks.


The move will mean non-bank payments service providers (PSP) in Britain will be less reliant on accessing the systems of the UK’s big four banks in order to process payments for their customers.

The BoE flagged the plans in May and on Wednesday published a detailed framework to make this happen as more and more people use their phone to pay a bill or shuffle money between countries.

The change allows new payments firms like those offering prepaid cash cards and prepaid online and mobile accounts, to have access to the BoE’s "real time gross settlement" or RTGS payments system.

A statement from the Bank of England, said: “Holding their own settlement account at the Bank enables these non-bank PSPs to apply, for the first time, for direct access to the UK’s sterling payment systems that settle in sterling central bank money, including Faster Payments, Bacs, CHAPS, LINK, Visa, and, once live, the new digital cheque imaging system.”

Remittance firms, which allow people to send money overseas, and foreign exchange services are also included.

"This should support financial stability through greater diversity and risk-reducing payment technologies," BoE Governor Mark Carney said in a statement.

It’s good news for PSPs as it will mean they won’t have to negotiate access to the systems run by the UK’s big four banks - Barclays, HSBC, Lloyds and RBS.

The BoE added that in its view, reducing the PSP’s dependence on the big banks systems will lead to a wider range of payments services.

The incoming PSD2 regulations will also ease things for startups, by enabling them to access - with owner’s express permission - the customer data that banks hold through open Application Program Interfaces (APIs).

In May, BBVA kick-started this open banking revolution, by opening up eight of its APIs to third parties - so it’s customers could benefit from the new products and services innovative fintech business are developing.

The move by BBVA means that if a customer gives their consent, these businesses can access some of the data around a customers spending patterns, or transactional history - amongst others - and use that information to add value for the customer either through a new product perhaps, or by sourcing them new services or suppliers.