Royal Bank of Scotland is heading back into the payments business, putting it in direct competition with its former subsidiary Worldpay for the first time since the lender was forced to sell the now multibillion-pound operator.
The group on Thursday will launch NatWest Tyl, a new merchant acquiring service for small and medium-sized businesses. Merchant acquirers enable retailers to accept card payments in-store or online, charging them fees to connect to the networks operated by the likes of Visa and Mastercard.
EU regulators forced RBS to sell its payments business, which was renamed Worldpay, as a condition of its taxpayer bailout of almost £50bn during the financial crisis. The payments sector has since been transformed, with companies such as Worldpay among the big beneficiaries of the broad shift away from cash.
Alison Rose, RBS head of commercial and private banking, said: “Developing our own merchant acquiring and payments proposition is an important step forward.”
The move is likely to be welcomed by regulators, who are reviewing competition issues in the sector. The Payment Systems Regulator has raised concerns that incumbents have been taking advantage of their dominance to overcharge small businesses.
Expectations that the payments business will sustain its explosive growth has driven a wave of dealmaking in the sector, with 2019 already on track to be a third straight year of record M&A volumes. In March Worldpay, which had already combined with US peer Vantiv in 2018, agreed to be bought by Florida’s Fidelity National Information Services in a deal that valued it at $43bn — close to the market capitalisation of RBS.
Paul Thwaite, managing director for sales, specialist businesses and business banking at NatWest, acknowledged that it would be a new experience for RBS to be a “challenger” in a market, but insisted the bank’s large existing customer base — it is the biggest lender to small and medium-sized businesses in the country — and extensive customer data would help it compete with larger payment specialists.
As well as basic payments services, Tyl aims to provide data analytics to help customers measure and improve their performance. It is the latest in a series of new technology-driven initiatives designed to strengthen RBS’s business banking offering, following a new digital loans service called Esme and a standalone business bank called Mettle.
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