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Fintech Q4 2023

How to build a better and more resilient UK payments industry

iStock / Getty Images Plus / Daenin Arnee

Tony Craddock

Director General, The Payments Association

To keep the UK payments industry competitive, its various stakeholders must work together to develop products that reflect changing technology, regulation and consumer needs.

Every time you make a payment via a digital mechanism — such as tapping your debit card on a contactless reader — the transaction is facilitated behind the scenes by a complex system of stakeholders. This is the UK payments industry at work: a fundamental enabler of commerce and society — and the fastest-growing part of fintech.

Challenges of staying ahead in global payments

The UK has long been a global payments leader. Yet, Tony Craddock, Director General of The Payments Association — the industry body representing over 200 members across the payments value chain — believes this hard-won reputation may be slipping away.

First, there’s the challenge of keeping up with the times as new technology changes business models. For instance, the traditional ‘four-party payment system’ — comprising the payer, payer’s bank, receiver and receiver’s bank — is under pressure from open banking, which is a direct and convenient way to transfer money between two entities.

There are issues surrounding regulation. “The UK has struggled to get the balance right between innovation and regulation,” notes Craddock. “Regulators have tried to enable innovation on the one hand while controlling it on the other.”

The UK has struggled to get the balance
right between innovation and regulation.

Flexible payments industry that is responsive to change

Recently, The Payments Association published its first-ever Payments Manifesto, covering financial crime, financial inclusion, open banking, finance and data, cross-border payments, environmental, social and governance (ESG), digital currencies and regulation and compliance. The document outlines policy suggestions that aim to bolster the industry and drive solutions.

“To keep up with the international competition, we have to be agile and flexible and evolve our products and propositions to reflect changing technology, regulation and consumer needs,” insists Craddock. “We also need to complete the open banking revolution and push on towards open finance and data.”

How collaboration enables innovation

Building a better payment system requires close collaboration between all relevant stakeholders. “We can only do this if we work together,” says Craddock. “But we need to get the right people — upstream and downstream — around the table. If they won’t come to the table voluntarily, regulation may be needed to get them there.”

Government support is crucial, too. “So far, politicians haven’t fully recognised the fundamental role the payments industry plays in enabling commerce and society,” adds Craddock. “We need the Government to provide leadership that supports our efforts to encourage people — particularly marginalised people — to use digital payments.”

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