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OPENING UP ACCESS TO BACS SERVICES
In February 2016 we issued a consultation on access titled ‘Payments Service Provider Access: Widening Access and Choice’. The consultation sought to offer more choice to PSPs to enable them to participate and gain access to our products. Our aim was to provide a fair, competitive environment in which PSPs can effectively offer services to their customers. The consultation was well received by key stakeholders across the value chain and produced a wide range of views.
We have reviewed and analysed these responses and have two key findings:
• There is broad support for the access ideas described in our consultation;
• Agency banks and other PSPs are faced with a restricted supply of cost effective access services
This lack of competition appears to be driven primarily by increased regulatory risks associated with the current model for access to our services that requires sponsorship by one of the banks who provide settlement services, the so called ‘member’ banks. These ‘members’ are ultimately liable for funds being available to meet payment obligations. Consequently, while a range of practical technical options are available or can be developed, the current ‘membership’ model and associated liability framework needs to be addressed if our aim for better open access to Bacs services is to be achieved.
We have therefore announced a roadmap for change to access. This journey will simplify access and offer more choice to PSPs seeking to connect to Bacs.
You can view the roadmap on our website here.
We want to provide a fair, competitive environment in which PSPs can effectively offer services to their customers. Widening access to emerging PSPs is obviously central to this achieving this aim.
We believe that the most powerful role Bacs can play is that of empowerment – helping end users to achieve their objectives, without dictating the way in which they do so.
In order to meet that objective we are continuing to develop and deliver changes to our access model, building on the findings from our consultation. The work streams we are progressing are as follows:
1) Technical Access
This will address the requirements and mechanisms for technical connection of PSPs to the central Bacs infrastructure. We recognise that, particularly for smaller PSPs, the technical costs of connection to the Bacs Transaction Processing Service (TPS) might be prohibitive. For this reason, we will enable the accreditation of Aggregators wishing to offer connectivity services to PSPs. By Aggregators, we mean a third party that provides one or more PSPs with a technical access solution enabling the submission of input to and, importantly, the collection of output from the Bacs service.
An Aggregator may also provide access to other payment schemes and offer a range of additional services to PSPs. As a result we would expect Aggregators to help remove the potential cost barrier by providing PSPs with a ‘one stop shop’ for technical access, offering a solution that opens up access to all Bacs products and services.
We would see Aggregators operating within the existing Bacs legal framework and be partnered for settlement services with a direct Bacs participant to provide PSPs with a more comprehensive, integrated access solution.
We are continuing to work with the Faster Payments Service (FPS) to deliver a new supplier of trust services (PKI) that will comply with the required assurance model for both FPS and Bacs services. This will increase the competitive supply of these services to the market.
Moving forward into 2017, we will be exploring opportunities to modernise the access channel options and provide updates to the current arrangements for access via Extended Transmission Service (ETS) and Swift Transmission Service (STS).
2) Service Access
Service access describes the rules, eligibility criteria and legal framework for PSPs to obtain access to the Bacs schemes.
In June 2016 we made changes to simplify the way in which PSPs gain access to Sort Codes. Direct access to sort codes marks a significant step forward in supporting PSP entry to the market. This month a new website will launch providing cross scheme information about Sort Code access and guide prospective PSPs to relevant information.
Access to appropriate documentation remains an important element to PSPs and other interested parties in making commercial decisions to join Bacs. During the remainder of 2016, and continuing into 2017, we will be refreshing documentation to support organisations wishing to join Bacs or provide services to PSPs. We are engaging directly with a number of would be new entrants to ensure that this revised material best meets their needs.
In 2017 we will be modernising the contractual framework for direct membership to Bacs. This is the critical legal framework that underpins the integrity of the payment scheme. We will be seeking to participants can choose a contractual framework which relates most appropriately to the services they offer. In this way we will be seeking to place liability with the organisation that introduces the risk. This approach will offer PSPs competitive freedom to take responsibility for their business risk without the requirement to gain approval from a sponsoring member. We will continue to enable the existing arrangements between sponsoring members and agency banks where those organisations wish to continue with that model. This theme aligns with the emerging strategy from the Payments Strategy Forum and supports efforts by the Bank of England to
widen access to the real time gross settlement (RTGS) system.
We continue to focus on maintaining the integrity of the Bacs payments system. During 2016 we are upgrading the central infrastructure. These changes are necessary because the internet community is adopting a new security certification – called SHA-2 – which will affect the requirements for accessing secure services, like our Payment Services Website. At the same time, we are withdrawing support for older connection protocols to provide even more protection for the communications pipeline between our access channels and service users.
Looking forward to 2017, existing smartcard, digital certificate and signing solutions will be replaced by sponsoring banks with new ones which provide a higher level of security for log-on, signing and submission of Bacs files.
By the end of 2016 we will have defined the mapping between ISO 20022, the international financial messaging framework, and the Bacs Standard 18 messages. This mapping will be the defined standard for any organisation wishing to submit payments and receive outputs from the Bacs infrastructure using the ISO 20022 messaging standard.
This workstream also aligns with the emerging Payments Strategy Forum strategy for ISO based messaging standards to be available as an access option for UK payment schemes. In 2017 we will be taking this forward to determine the optimum approach to procuring an ISO 20022 to
Bacs Standard 18 translation service or whether provision of such services should be left to the market to provide.
5) Cross Scheme
Bacs is continuing to work with other schemes, specifically Faster Payment Service, Cheque and Credit Clearing Company, Chaps and Link to address common Payment Scheme Operator (PSO) participation models and rules. This emerged as an early request from the Payment Strategy Forum to examine ten areas:
- Common terminology
- Common eligibility criteria
- Categorisation of participants
- Articulation of common payment products by PSO
- Engagement with indirect participants prospective entrants and providers
- Rules, Procedures and Participant Agreements
- Technical accreditation process
- Assurance process
- On-boarding process and migration to common connectivity models
- Access to information and documentation
We will continue to provide updates on our progress with our immediate changes during 2016. Our longer terms changes will be progressed in 2017.