Reflections on the Future of Payments Review

I, for one am passionate about the opportunity payments has in the UK. It's a pivotal point in its evolution, looking at new innovations coming to market, such as the RLN but also seeking to strike that fine balance with the regulation that needs to be in place to keep consumers and clients safe and secure, and also to ensure those most vulnerable in society have access to all the services that they deserve.

Enabling our clients to innovate in payments is a core part of the work that we do at Baringa and we were delighted to contribute to the “Future of Payments Review”. A healthy economy relies on thriving payment ecosystems and in the UK we see over £100 trillion of transactions flowing through our payments infrastructure.

The UK is in a strong position, investing in high profile initiatives such as Open Banking and Central Bank Digital Currencies. However, there is still progress to be made and the report identifies a number of tangible recommendations that will keep us ahead of international competition to drive higher economic growth, including a view on the potential benefits, but also the headwinds now facing innovations such as NPA. Perhaps the strongest recommendation is that the UK government develops a national payments vision and strategy to simplify the current landscape and define guiding principles on the topics of safety, simplification, coordination of initiatives, responsiveness to innovation and inclusivity. Although this may feel like a well-trodden path, the review recognises its limitations in breadth and depth, given the limited time in which it was conducted AND how rapidly the industry is transforming.

We believe such a strategy could provide the clarity of direction needed around the priorities and the pace of change. For consumers, the UK has a relatively mature banking, cards and digital wallets market that operates in a well-developed regulatory environment. The report highlights that more work is needed to improve the consumer-to-consumer bank transfer process and recommends that HM Treasury accelerate the process of taking advantage of post-Brexit flexibility and move away from the very detailed Strong Customer Authentication technical standards flowing from the EU Payment Services Directive.

Migrating to an outcomes-based approach will improve the consumer experience and further reduce fraud. Further developments in Open Banking could provide an alternative to card schemes which merchants and retailers are crying out for to reduce costs. However, a consumer dispute resolution process must be in place or this will continue to be a barrier for wider adoption. We also need to see more clarity in the commercial arrangements for open banking with better alignment between the costs and benefits.

The report recommends that the Government and Joint Regulatory Oversight Committee agree a commercial model so that there is scope to invest in both the infrastructure and consumer protection. The government’s engagement with Big Tech is also an area of focus. Big Tech’s role in consumer payments will continue to rise by delivering slicker customer experiences. Government relationships with Big Tech firms need to be well coordinated with the aim of creating mutual benefit and partnerships. Attempting to direct or overregulate these companies could result in scaled back operations within the UK, but at the same time weak or ill-defined regulation could lead to an uneven playing field and in the worst cases unfair customer outcomes.

We would love to discuss your thoughts and reflections, so don’t hesitate to join the debate, and get in touch with myself or one of the wider Baringa team.