Contributed
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At the end of last week, the government launched its National Payments Vision. Described as built on three key pillars of innovation, competition and security, it presents welcome details on regulatory coordination and upgrading payments infrastructure, identifies Open Banking and fraud as areas priorities and establishes a Payments Vision Implementation 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 mission letter has been sent to both bodies, welcoming the FCA’s commitment to leading work to improve the management of overlap between the two bodies in the exercise of their functions.
Payment infrastructure upgrades
The newly established Payments Vision Delivery Committee, through work led by the Bank of England and the PSR, will clarify required upgrades to the existing faster payments system, assess long-term requirements and arrangements for appropriate financing and governance needed to achieve this – including proposals. to reform Pay.UK.
Open banking
The government has described unlocking account-to-account payments enabled by Open Banking for e-commerce as a “short to medium term strategic priority”. The government has also recognized the potential beyond its role in providing transparent account-to-account payments. Open Banking presents significant opportunities by enabling customers and businesses to leverage their data to access personalized and tailored services and financing. The government says its “ambition is for the UK to become 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 greater ability to engage in financial services. THE
Data (Use and Access) Bill, which was the subject of my last article herewill be essential to this work and also includes the FCA becoming the UK regulator for Open Banking. This move to a single authority will help maintain a consistent approach to payment initiation and data sharing under Open Banking. The FCA will need to collaborate effectively with other relevant authorities, including cooperating with the PSR on matters relating to designated payment systems.
CBDC: the digital pound
We are still at the exploration stage.
The vision opens the section – digital ledger – with a line on the government’s commitment to protecting access to cash, but also recognizes the emergence of new forms of digital currency. The Vision promises to continue working with the Bank of England on the design phase of a retail CBDC, but reiterates that no decisions have been made on whether to launch a digital pound.
The government also pledges that any decision to move forward would be accompanied by the introduction of primary legislation, which would ensure users’ privacy and control of their money.
Fraud
Independent estimates suggest that fraud cost UK consumers £8.3 billion last year alone. It is absolutely right that this is considered a key priority.
Again, the FCA will lead work to manage existing overlaps between it and the PSR, although the latter has committed to an independent review following the implementation of the authorized Push Ten payment fraud reimbursement rules, following twelve months. It is positive that the Government recognizes the role that the technology and telecommunications sectors play in combating authorized push payment fraud, highlighting that the Online Safety Act 2023 places the obligation on large technology platforms to prevent fraudulent content on their services or face substantial fines if they fail to do so.
Ofcom is also working with operators to prevent the misuse of phone numbers by criminals, stem the tide of fraudulent messages and tackle mobile identity theft. These are positive steps, but more needs to be done – I hope to see more progress between now and the next Joint Fraud Taskforce in March 2025.
Implementing the national payments vision
The government is establishing the Payments Vision Implementation Committee to drive change. The committee will be made up of senior representatives from the Bank of England, the FCA and the PSR, responsible for ensuring coordination between regulators. It will provide a mechanism to facilitate initiative prioritization decisions.
Her Majesty the Treasury will chair the committee to support this work and help ensure decisions are aligned with the Government’s vision. The Committee will operate for an initial period of 9 to 12 months, after which its future role will be evaluated. The committee will be tasked with providing more clarity on required upgrades to the UK’s faster payments system; assess the future needs for UK retail payments infrastructure, beyond upgrading to faster payments, to take into account the needs and development of UK retail payments in their together ; and determine the governance arrangements needed to achieve this, including proposals for reform of Pay.UK.
The UK is a world leader in payments. We benefit from a strong financial services environment and a well-established regulatory framework. The rise of fintech and developments in technologies such as blockchain/DLT and AI, as well as enhanced data sharing are likely to fundamentally change the ecosystem.
Joe Garner’s 2023 review has 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 its international peers. Has this vision done enough to achieve what is hoped for: a world-leading ecosystem that ensures reliable payments, made on next-generation technology, with more choice for consumers and businesses. Can these changes create competition that drives both innovation and security and benefits everyone?