Banks should loosen their grip on the way payments are processed, to pave the way for more innovation and competition, a regulator has suggested.
The Payment Systems Regulator (PSR) made its provisional findings in a market review into the ownership and competitiveness of the infrastructure that supports Bacs, which processes direct debits and credits; the Faster Payments System (FPS), which processes internet and telephone banking payments; and cash machine network Link.
These systems are owned by a "relatively small" number of banks, which also control VocaLink - the central system that processes more than 90% of salaries, over 70% of household bills and almost all state benefits in the UK, the regulator said.
In 2014 these payment systems were responsible for nearly 10 billion transactions, involving the movement of nearly £5.5 trillion.
The regulator is proposing that banks sell part of their stakes in VocaLink - "to open the market and allow for more effective competition and innovation".
It said evidence indicates that the common ownership of the infrastructure provider by a small number of banks is having a negative impact on innovation and competition in the industry.
Its report said payment systems, which support the services that enable money to be transferred between people, businesses and institutions, "form a vital part of the UK's financial system as they can contribute to the country's financial stability and economic growth".
The PSR is inviting feedback and its consultation will remain open until April 21.
Hannah Nixon, managing director of the PSR, said: "Our proposals will increase competition and create more opportunities for challengers, fintechs (financial technology firms) and other organisations looking to enter the market.
"This will create the conditions for greater innovation - which is in the interests of those that use the infrastructure services directly, and the UK economy as a whole."
A spokesman for Payments UK, which represents payment service providers, said: "The current arrangements have and continue to serve the UK well and, as acknowledged by the regulator 'the payments industry has evolved at a steady pace'.
"However, changes in technology, customer payment needs and an evolving payments industry makes the time right to review what is going to serve the UK's best interests in the future.
"The payments infrastructure is a critical part of the UK economy and it is vital that the optimum outcome is secured for the UK and that unintended consequences are avoided."
He said Payments UK's work on the future of payments "should facilitate and support whatever the regulator decides".
Economic Secretary to the Treasury Harriett Baldwin said: "Today's report is an important step towards a more open payment system which will benefit millions of consumers and firms who rely on it for making payment?s on a daily basis."
Nick Caplan, independent chairman of Faster Payments, said it has been working to create a new way for challengers to access Faster Payments - and this is set to deliver significant changes soon.
He said: "We run our service on a not-for-profit basis, only recovering the costs of offering a world-leading service with secure, real-time payments 24 hours a day, seven days a week to those payment providers that wish to make use of the service.
"Consumer access to Faster Payments is near universal in the UK, and to further promote competition in the evolving sector we have a major programme in place to ensure a fair and level playing field is offered to all those that need or want it."