Fintech firms want to open accounts at the Bank of England
Payments and technology firms want the right to open bank accounts at the Bank of England,
A right traditionally only given to banks and one which gives them access to the payments system
Tech firms are in talks with the Bank of England to secure settlement accounts, a privilege only currently on offer the banks.
The accounts would help give the finance technology (fintech) firms access to the payments system, the infrastructure which currently underlies much of Britain’s financial services industry.
Currently fintech firms have to pay big banks for second-hand access to the payments system, which is expensive and means the tech firms are reliant on rivals to provide a service to their customers.
Challenger banks also have to pay the big banks for this access, but as they already have the ability to set up settlement accounts the small lenders are already undergoing the application process to get direct access to payments systems including Faster Payments.
But tech firms are currently not allowed this, as they do not have banking licences.
Richard Wagner, head of the Emerging Payments Association, visited the Bank of England on Friday to hold preliminary talks with officials on the topic.
He runs Advanced Payments Solutions and argues the payments companies are at least as safe as banks.
“We are not fintech cowboys, this is for firms which are regulated but do not necessarily have the banking licence… payment institutions such as Paypal, e-money issuers like us, who have over the past 10, 15, 20 years been running a regulated entity and we believe are competent enough to run it directly,” Mr Wagner said.
“As payments institutions we are always 100pc collateralised – for every £1 liability we have £1 of assets. We are not leveraged like a bank is, so if all customers withdraw their money at once, unlike a bank we can satisfy it.”
Bank of England deputy governor Minouche Shafik has raised the prospect of opening up the system, as much of the Real Time Gross Settlement (RTGS) system run by the Bank was designed in 1996 before internet payments emerged as an important industry.
The current talks are expected to lead to a consultation with the wider industry and a decision could be made by the end of the year on the type of access which could be given to fintech firms.