Financial market infrastructures – what happens when you pay?

When you pay by card for your shopping, or take cash out of the ATM, it may seem like the money is magically transferred from your bank account to the shop, or into your hand. But there’s a whole network of processes and systems that make this possible. These are known as Financial Market Infrastructures – or FMIs for short.

Like banks, we regulate FMIs to keep the financial system stable. You might have heard of some FMI companies, like Visa and Bacs. But what exactly are FMIs and why are they important?

Play What are FMIs? video

Bank of England's KnowledgeBank guide to financial market infrastructures.

Financial Market Infrastructures, also known as FMIs are different to banks. Essentially, they are the networks that allow financial transactions to take place and are commonly referred to as the plumbing of the financial system. Many of us use FMIs on a daily basis, for example for salary or pension payments into our bank accounts, to take cash out of a cash machine or to pay for something online. Every day we make around 360 billion pounds worth of these types of payment through FMIs based in the UK, and regulated by the Bank of England. FMIs also perform a number of other key functions that underpin the financial system. Shares bought and sold in companies are transferred using FMIs, and they help banks to borrow money from others in the financial markets, allowing them to make loans to people who want to buy a house or start a new business. In general FMIs help to make financial transactions between people, businesses and the financial services sector, safer, more efficient and cheaper.

Why does the Bank have a role in regulating FMIs?

Because of their importance to the smooth functioning of the financial system, the Bank of England regulates certain FMIs to help make sure they are operating safely. We look at whether those in charge of the FMIs have the right skills, and we check to make sure that their operations are sound.

Why do we do this? In a nutshell, if FMIs stopped working then you wouldn’t be able to make bank payments through mobile or online methods, you wouldn’t be able to make card payments or get cash out of cash machines.