PSPs in the UK have had their horizons broadened further by a new partnership offering access to Faster Payments and settlement via challenger bank Starling and cloud-based payments-as-a-service start-up Form3.

The deal will provide clients with an end-to-end managed service using Starling’s access to Faster Payments and Form3’s cloud-based secure processing standard.

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Small payments players and e-money issuers in the UK have had to pay hefty rates to access payment rails through the tier 1 banks that collectively own the payment systems in the UK and there has been a growing lobby against this in recent years, spearheaded in no small part by one Rich Wagner, CEO of APS.

Starling Bank became the 13th member of Faster Payments at the beginning of 2017 and the first mobile-only bank. Now it has partnered with new fintech on the scene, Form3 to provide real-time access to Faster Payments for smaller players, who traditionally route through the Tier 1 banks and are subject to clunky, sometimes unreliable back end legacy systems as a result.

The Payment Systems Regulator was put into effect to remedy this as part of its objective to increase competition and foster innovation in the UK payments field.

Mike Walters, Chief Product Officer at Form3, said, “At Form3 our clients face some complex decisions about how they gain access to real-time faster payments in the UK and which banking partners can help them to achieve that. Our partnership with Starling Bank shows Form3’s commitment to making sure that managed services for our clients extend all the way from payment to settlement under a single commercial contract. This provides a great option to leverage cloud based technology with simple integrations, a wider range of processing options and reduced time to market.”

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Form3 was set up in 2015 by a veteran payments banker from Barclays, Michael Mueller, flanked by a team of payments experts and ex-bankers. Mueller was frustrated with the standard being offered by fintech vendors, describing it as “selling old software to sit atop legacy systems, masquerading it as cutting edge technology and failing to tackle back office problems”.

Further to this, Mueller saw that smaller payment companies were priced out of the system and saw an opportunity in cloud-based infrastructure to ameliorate the offering for payments outfits, large and small. One of the sticking points of the typical vendor model is having to sign up to a ten year service licence for software, during which time the technology becomes outdated. This is known in banks as “sweating the assets”.

Mueller says it is “rare in bank back office land, and unique in payments” to have a (cloud) component based platform as opposed to a “monolithic piece of code”.

And they will do SEPA as well. It would be misguided to ignore SCT Inst, going live November 2017.

With Form3, Mueller says the business case for switching to a pay-as-you-go service is clear, even if it involves writing off the asset, because the cheaper infrastructure “makes a massive saving, not just 10-20%, it is in a different space”.

Mueller insists the user experience can only be improved upon if the back end is tidied up.

Key to Form3’s platform is its so-called multi-tenancy aspect, meaning there is one platform that any kind of organisation can plug into on a pay-as-you-go basis without having to pay for an individually configured platform. And of course at the end of this tenement are payment gateways connecting to the clearing and settlement platforms at the Bank of England.

Bang in time for SEPA Instant Credit (SCT Inst) in November 2017 and PSD2 and Open Banking in 2018, Form3 could do very well out of putting themselves on the radar now.