Metro Bank: Payments regulation plans fail to guarantee fair access to shared infrastructure

Matthew Finnegan

Metro Bank has claimed that changes to payments regulation fail to address immediate concerns over fair access for new market entrants to payments systems owned by large providers.

The government announced plans earlier this week to introduce a payments regulator under the control of the Financial Conduct Authority (FCA) in 2015, in a bid to boost innovation and increase competition between banks.

Commenting on the announcement, Metro Bank chief executive officer Craig Donaldson said that plans fell short of guaranteeing equal access to payments platforms used to transfer funds between banks, such as Faster Payments and Bacs, claiming that immediate action is needed to improve competition.

Currently Metro Bank, a new market entrant which is looking to grow to 200 branches by 2020, has to pay an agency banking fee for use of payments systems that are free to use by the incumbent banks which own the payments systems.

"As always, we welcome any move towards a more competitive banking market. In particular, we're pleased to see a concrete step towards the creation of a new payments-focused regulator, the Payment Systems Regulator," said Donaldson in a statement.

"However, a more competitive banking can only be achieved when there is a level playing field for all banks - including new and smaller players. One of the key issues that inhibits competition in the sector is access to, and ownership of, the payments system for small and new banks, and we're disappointed that this issue has been put on hold to be decided by the new regulator.

"Despite the severely flawed model of the current payments system, this consultation acknowledges that the Payment Systems Regulator may not be active until April 2015, and even then, there is no guarantee that any action will be taken on this matter.

Donaldson concluded: "The payments landscape is currently dominated by large banks levying agency banking fees. While we agree that there must be no action without a viable alternative to the current system, this consultation offers no firm path to progress."

Metro Bank was one of the organisations which responded to the government consultation which led to the creation of the payments regulator. As part of the consultation Metro Bank called for payments systems to be removed from banks' internal mechanisms, to be replaced by an independent 'plug and play' platform.

This model, in use by the US banking sector, involves the provision of central payments infrastructure as a utility for all banks to use, and the idea has received backing from the Bank of England's executive director of financial stability, Andrew Haldane. However larger banks have opposed due to the cost of implementing such a platform.

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