Late last week the government launched their National Payments Vision. Described as resting upon three key pillars of innovation, competition,
and security it sets outs welcome detail on regulatory coordination and payment infrastructure upgrades, identifies Open Banking and fraud as priority areas and establishes a payments vision delivery committee to focus on implementation.
Regulatory cooperation, coordination, clarity, and consistency
The government clearly wants the two main regulators, the Financial Conduct Authority (FCA) and the Payment Services Regulator (PSR), to be more coordinated. A joint remit letter has been sent to both which welcomes the FCA’s commitment to lead work on enhancing
the management of overlaps between the two bodies exercise of their functions.
Payment infrastructure upgrades
Th newly established Payments Vision Delivery Committee will, through work led by the Bank of England and PSR, clarify the upgrades required to the existing Faster Payments System, assess longer-term requirements and the appropriate funding and governance
arrangements needed to deliver this – including proposals to reform Pay.UK.
Open Banking
The government have described unlocking Open Banking enabled account-to-account payments for e-commerce to be a “strategic short to medium term priority”. The government has also recognised the potential beyond its role in delivering seamless account-toaccount
payments. Open Banking presents significant opportunities by further enabling customers and businesses to leverage their data to access personalised, tailored services and finance. The government says its “ambition is for the UK to be a world leader in Open
Finance – the next generation of financial data sharing”.
The benefits are well known and potentially transformative for businesses and customers, enabling choice, innovation, and a greater ability to engage with financial services. The
Data (Use and Access) Bill, which was the subject of my last piece here, will be essential to this work and also includes the move to the FCA becoming the UK’s regulator for Open Banking. This shift to a single authority will help sustain a coherent approach
to Open Banking payment initiation and data sharing. The FCA will be expected to engage effectively with other relevant authorities, including cooperating with the PSR on matters related to designated payment systems.
CBDC: The Digital Pound
This is very much still at exploration stage.
The vision opens the – digital pound - section with a line on the government’s commitment to protecting access to cash but also acknowledges the emergence of new forms of digital money. The vision promises to continue working with the Bank of England on
the design phase for a retail CBDC but reiterates that no decision has been taken on whether to launch a digital pound.
The government also commits that any decision to proceed would be accompanied by the introduction of primary legislation, which would guarantee users’ privacy and control of their money.
Fraud
Independent estimates suggesting that fraud cost UK consumers £8.3 billion last year alone. It is absolutely right that this is identified as a key priority.
Again, the FCA will lead work to manage existing overlaps between itself and the PSR, although the latter has committed to an independent post implementation review of the authorised push ten payment fraud reimbursement rules, after twelve months. It is
positive that the government recognises the role that the technology and telecommunications sectors play in tackling authorised push payment fraud, highlighting that fact that the Online Safety Act 2023 imposes obligations on large technology platforms to
prevent fraudulent content on their services or face substantial fines if they fail to do so.
There is also ongoing work from Ofcom with operators to prevent the misuse of telephone numbers by criminals, stem the tide of scam messages and address mobile spoofing. These are positive steps, but more must be done – I hope to see more progress by the
next Joint Fraud Taskforce in March 2025.
Implementing the National Payments Vision
The government is establishing the Payments Vision Delivery Committee to drive change. The committee will be comprised of senior representatives of the Bank of England, FCA and PSR, with responsibility for ensuring coordination between the regulators. It
will provide a mechanism to facilitate prioritisation decisions on initiatives.
HM Treasury will chair the Committee to support this work and help ensure decisions are aligned with the government’s vision. The Committee will run for an initial period of 9-12 months, after which its future role will be assessed. The committee will be
tasked with providing greater clarity on the upgrades required to the UK’s Faster Payments System; assessing future requirements for the UK’s retail payments infrastructure, looking beyond the upgrading of Faster Payments to consider the needs and development
of the UK’s retail payments at large; and determining the governance arrangements needed to deliver this, including proposals to reform Pay.UK.
The UK has been a global leader in payments, we are blessed with a strong financial services environment and a well-established regulatory framework. The rise of fintech and developments in technologies like blockchain/DLT and AI, as well as enhanced data
sharing have potential to fundamentally alter the ecosystem.
Joe Garner’s 2023 review called for a strategic vision for UK Payments arguing that the UK must act quickly to seize the opportunities of the future, or risk falling
behind international peers. Has this vision done enough to deliver what is hoped for - a world-leading ecosystem that ensures trusted payments, delivered on next-generation technology, with more choice for consumers and businesses. Can these changes create
competition that drives both innovation and security and benefits for us all?