Bank of England gives fintech startups direct access to the UK’s RTGS payments system in latest innovation move

The Bank of England has opened up the UK’s payments systems – the “plumbing” which facilitates same day money transfers between banks – to organisations that are not banks, giving fintech startups another step up in their challenge to traditional banks.

Tech companies will no longer have to go through selected banks and other providers for a settlement account with the Bank of England which allows them to transfer money between different institutions on behalf of customers. That includes Bacs, Chaps and Faster Payments.

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Currently many fintech firms and digital challenger banks rely on working with big banks such as Barclays, HSBC and Lloyds to access these payments services.

It’s the latest move by the UK’s financial authorities to foster technology innovation and “level the playing field” between the established institutions and newer ones.

“I am delighted that the Bank of England, the Financial Conduct Authority and the Treasury are working together to stimulate competition and innovation in payment services by widening access to the UK’s payment systems to non-bank payment service providers,” said Bank of England governor Mark Carney.

“In parallel this should support financial stability through greater diversity and risk-reducing payment technologies.”

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The central bank is undertaking a major review of Real-Time Gross Settlements systems (RTGS) with a view to overhauling it by 2020 to move with the times and improve stability.

Any firm can now apply to access RTGS but will have to “demonstrate compliance with this risk management framework”. The BoE said it expects the first non-bank or payment service provider to have access ,subject to legislation making its way through parliament and coming into force, in 2018.