Figure 1: Financial Services Value Chain  At present, the most significant changes are taking place at the front-end, where innovative payment service providers (PSPs) are providing new user interfaces for domestic retail and cross-border payment services through digital wallets or pre-funded eMoney. 8  Other aspects of the customer relationships are being opened up. For example, aggregators are providing customers with ready access to price comparison and switching services. This will increase further when aggregators gain access to banks’ Application Programme Interfaces (APIs). 9  These new entrants are capturing potentially invaluable customer data which can be used to target non-bank products and services. 10  8  For example, more than 80% of incumbent financial institutions thought their customers were already using FinTech companies to make payments whilst nearly 70% thought they were doing the same for fund transfer and around 60% for personal finance. Only 50% thought their customers were doing so for traditional deposits and savings. See PWC “Global FinTech Report” (2017). 9 The second Payment Services Directive (PSD2) will allow, conditional FCA authorisation and customer authority, non-banks to access customers’ bank account data. In the UK, the Competition and Markets Authority has required that the UK’s nine largest banks adopt an open banking standard for APIs by early 2018.
6  All speeches are available online at www.bankofengland.co.uk/speeches  6  The Right Hard Infrastructure A second, related example is how the Bank is working to develop the financial system’s hard infrastructure to allow innovation to thrive while keeping the system safe. Specifically, the Bank is widening access to some of its systems to include PSPs in order to boost both competition and system resilience. The UK has led the world in innovation in the wider payments ecosystem. And we are committed to keeping pace with customer demands for payments that are seamless, reliable, cheap, and ubiquitous. Our challenge is how to satisfy these expectations while maintaining a resilient payment systems infrastructure. That’s important because the Bank operates the UK’s high-value payment system ’RTGS’ which each day processes £ trillion of payments on behalf of everyone from homeowners to global banks. Understandably, we have an extremely low tolerance for any threat to the integrity of the system’s “plumbing”. Currently, only 52 institutions have settlement accounts in RTGS. Indirect users of the system typically access settlement via one of four agent banks. These indirect users include 1000 non-bank PSPs at the front-end of the financial services value chain. As they grow, some PSPs want to reduce their reliance on the systems, service levels, risk appetite and frankly goodwill of the very banks with whom they are competing. The Bank has decided to widen access to RTGS to include non-bank PSPs in order to help them compete on a level playing field with banks.