Written evidence submitted by VocaLink|
processes automated payments in the UK, including all Direct Debits,
Direct Credits and Faster Payments; this accounts for approximately
half a billion payments a month. It also operates LINK, the world's
busiest ATM network of over 63,000 cash machines.
services (Direct Debits and Direct Credits) have been available
for many years, work well and are readily accessible by market
UK Faster Payments Service has been available since 2008, delivering
real innovation to consumers.
do not believe that access to systemically important payment systems
represents a barrier to entry in the banking market.
believe the consumer inconvenience in switching banks has been
largely removed by the ToDDaSO service, although there is potential
for further innovation in this area.
believe that there is considerable scope for better delivery and
further innovation in mobile payments offerings to consumers.
1. VocaLink welcomes the opportunity to
contribute a submission to the HM Treasury Committee's Inquiry
into competition and choice in the banking market.
2. VocaLink is a specialist provider of
transaction services. We process automated payments in the UK
including Bacs Direct Debits and Direct Credits, the method by
which 95% of salaries and 98% of state benefits in the UK are
paid. It is estimated that over 70% of household bills are paid
by Direct Debit, and the total value of payments flowing through
the Bacs system in 2009 was £3.8 trillion.
3. We provide the real-time central infrastructure
for the UK Faster Payments Service - which enables payments, including
state benefits, to be made between accounts within seconds. Our
services operate in highly secure data centres on "never
fail" technology which ensures total reliability and availability,
24 hours a day.
4. The specific purpose of this submission
is to demonstrate that access to payment systems does not, in
our opinion, represent a significant barrier to entry in the banking
5. The Bacs service has been in existence
since 1968, and in 2004 following the Cruickshank Report it was
divided into a scheme company (Bacs Payment Schemes Limited) and
an infrastructure company (originally called Voca, now VocaLink
following the merger between Voca and LINK in 2007). The separation
of scheme and infrastructure provides a level of separation between
the customers and the owners of the service. This model has been
followed for the Faster Payments Service, launched in 2008, and
has been widely copied in Europe and elsewhere. The Faster Payments
scheme is managed by CHAPSCo and the infrastructure is provided
6. The Bacs service (Credit Transfers and
Direct Debits) has been running for over 40 years and its potential
market is approaching saturation, although there are ongoing efforts
by Bacs and the industry to encourage even higher levels of adoption
of Direct Debits by consumers. The Faster Payments scheme was
launched in May 2008 and banks are currently completing the migration
of Standing Orders and remote banking transactions to this service
away from Bacs. The Faster Payments Service has the potential
to attract other types of payment, including lower-value CHAPS
transactions and support new payment methods such as mobile payments
and on-line payments (as an alternative to cards). There has been
wide interest in the concept of Faster Payments from other countries
seeking to learn from our experiences.
7. We do not perceive access to the Bacs
and Faster Payments services as a barrier to entry or expansion
in UK banking. The agency bank model works well for Bacs although
it should be noted that after two years operation there are still
no agency banks providing access to Faster Payments services directly.
This may be due in part to the technical complexity of building
or purchasing a gateway and then integrating this to the bank's
back office systems. We have recognised the demand for a managed
service offering in this area and have developed a Faster Payments
Managed Service to offer an easier channel for agency banks and
other potential FPS users.
8. The provision of the ToDDaSO service
(Transfer of Direct Debit and Standing Orders) has largely removed
the customer inconvenience of cancelling Direct Debits and Standing
Orders with one bank and then having to re-establish them at the
new bank. This service has worked well for a number of years and
has removed the major obstacle to account switching.
9. Further enhancement to ToDDaSO to provide
linked electronic transfer of associated funds, the extension
of the service to investment accounts such as ISAs and the migration
of the service to real-time operation would significantly enhance
the benefits to the consumer.
10. The near universal use of mobile phones and
the sharp growth in availability of smart phones provides a compelling
base for innovation in delivering mobile banking, and in particular
mobile payments. The launch and widespread take-up of mobile banking
services from major banks in the past two years shows that there
is significant consumer demand for further innovation in delivering
mobile payments. The key driver for future demand is likely to
be the ability to clear funds between accounts within a few seconds,
utilising existing services such as Faster Payments and LINK.
We believe that there is a compelling case for industry collaboration
to facilitate full account reach and widespread take up of such
services. Mobile payments will deliver credible alternatives to
cheque and cash usage, and allow consumers greater control of
10 VocaLink consumer research August 2010; available
on request. Back