Crypto-Native Xapo Bank Joins UK Faster Payment System

March 23, 2023
Xapo Bank, a crypto-native bank registered in Gibraltar, has joined the UK’s Faster Payment System as an indirect member.

Xapo Bank, a crypto-native bank registered in Gibraltar, has joined the UK’s Faster Payment System (FPS) as an indirect member.

The entry to the FPS means that Xapo Bank customers can now make instant, cost-free transfers to other bank accounts in the UK and participating overseas territories.

Xapo Bank customers can also use FPS to make instant transfers to UK-based digital wallets such as Wise and Revolut, and to UK-based crypto exchanges.

At present, Xapo Bank only accepts deposits in bitcoin, USD, euros and Swiss francs. If a customer funds their account by sending GBP via FPS, the funds are automatically converted into USD on receipt. The USD then begins earning 4.1 interest (at current rates).

Likewise, USD sent from a Xapo Bank account via FPS are converted to GBP based on the current exchange rate.

No fees are charged by Xapo Bank on FPS transactions, making the service free to use with near-instant availability of funds and encrypted transaction data.

Indirect access widens

A key feature of Xapo Bank’s entry to the FPS is that it will serve as an indirect participant, meaning its access to the system is facilitated by a sponsor.

Speaking to VIXIO, a spokesperson for FPS operator Pay.UK said that Xapo Bank had met the safety and soundness requirements to access the FPS indirectly, but declined to identify which bank will act as the sponsor.

“All indirect payment services providers are obligated to abide by FPS rules and regulations, and are supported by their sponsors to understand and comply with those obligations,” the spokesperson said.

“Pay.UK also carries out checks on all indirect participants to ensure they are authorised by the recognised financial regulators in the jurisdictions where they are registered.”

On its website, Pay.UK keeps a full list of direct participants in the FPS. Separately, Pay.UK has published additional information about providers that offer sponsored access to the FPS.

During the last decade, the number of providers that offer sponsored access to the FPS has more than tripled.

This is partly the result of the Faster Payments New Access Model launched in 2014 and a new Pre-Funded Settlement Model introduced in 2015.

The Pre-Funded Settlement Model removed a barrier for smaller challenger banks that were unable to join the FPS directly due to previous shared credit and settlement risks.

With smaller banks gaining access as direct participants of the FPS, several of these new participants saw an opportunity to compete with large incumbent banks such as Barclays, HSBC, Lloyds and RBS in offering sponsored access to other firms.

Among this new breed of banks offering indirect access to Faster Payments are Starling Bank, Modulr and Clearbank.

Clearbank, for example, which joined the FPS as a direct participant in 2017, said it launched a Faster Payments Originating Overseas product in 2021 to enable its partners to use the FPS to process GBP payments that have originated outside the UK.

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