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By Huw Jones
LONDON, July 21 (Reuters) - Britain's regulator for thepayment systems used by banks to shift cash said it would holdoff from taking further action to boost competition as lenderssold off their holdings in a core payments system to MasterCard.
Britain is trying to increase competition in a bankingsector dominated by a handful of large players like Barclays and RBS which own chunks of the paymentssystem.
Easy and commercially attractive access to the country'spayment systems is essential for newcomer banks which can'tafford to build their own systems.
The Payments Systems Regulator (PSR) said in the finalconclusions of its market review into competition in the sectorthat access to new entrants was becoming easier.
PSR's report coincided with an announcement by MasterCardthat it was buying VocaLink, one of Britain's core paymentsystems, for 700 million pounds ($922.32 million), triggeringannouncements from Barclays, RBS and others about how much cashthey will receive from the sale of stakes.
In February, the PSR had said that 18 banks and buildingsocieties should cut their stakes in VocaLink to increasecompetition.
Common ownership of VocaLink by a small number of banks washaving a negative effect on innovation and competition, it saidat the time. VocaLink processes more than 90 percent ofsalaries, over 70 percent of household bills and almost allstate benefits.
PSR's market review looked at so-called indirect access,meaning a new bank or payment company plugging into the systemvia another bank and the charges that entails.
Some banks are less willing to give access to moneyremitters due to concerns about complying with tougher rules tocrack down on money-laundering but these rules were being lookedat, the PSR said.
Switching between indirect access providers was alsodifficult in some cases, it said.
The watchdog said the impact of anticipated marketdevelopments would address many concerns and it had thereforedecided not to take any further action at this point.
More banks with direct access to the payments system plannedto become indirect access providers within the next nine months,it added.
"The more we can open up access, the more challenger banksand building societies will be able to come to market andcompete on a level playing field," PSR Managing Director HannahNixon said in a statement.
"This in turn will give more options to consumers."
The PSR, a unit of the Financial Conduct Authority, alsolaunched a public consultation on how it proposes to use itspowers to force a payment system operator to grant access orvary the terms of existing access.($1 = 0.7590 pounds) (Reporting by Huw Jones; editing by Adrian Croft)
