David Song, UK Finance
Principal, EU Personal Finance Policy
Once a quiet corner of the world, payments is a diverse and complex industry that is evolving at rapid speed.
Driven by a combination of regulatory developments, competition from new entrants, technological advances and changing customer expectations, the industry not only provides the foundations for the wider economy but continues to innovate and drive changes in technology and society.
Imagine a world without the ability to shop with a card, buy easily and securely online, pay bills without having to think, or even withdraw cash. Because of how convenient it is to pay, we often forget how this impacts our wider lives, but we shouldn’t overlook the difference this makes to customers, to small businesses, or to the wider economy.
The UK is leading the way
The UK payments industry continues to lead the way and enhance how customers and businesses interact, with major changes underway in all parts of the industry. Changes like instant payments across borders in Europe, Open Banking and even the digitalisation of cheques will all make a real difference to customers.
UK Finance leads the critical work to ensure a coordinated approach around a significant number of industry changes and to secure the best outcomes for UK customers and the market. This is being achieved by working closely with our members, the wider industry and key stakeholders – both domestically and internationally.
A number of changes in the UK are world leading and we anticipate they will allow for the development of new types of products and services that will become central to how we interact with our banks and financial providers in the future. One such change is called Open Banking, which will enable appropriately regulated companies to give more accurate personal financial guidance, tailored to customers circumstances and initiate payments on the customers behalf, all delivered securely and confidentially.
This matters, because it will make internet and mobile payments easier and help customers to manage their finances better. It will also allow customers to better compare deals, giving the customer the opportunity to find the best products for them. The changes could help open up new markets and encourage new market entrants, some of whom will offer services that will assist people who are currently financially excluded. There are a whole host of opportunities that it may not be possible to fully anticipate which could hugely benefit customers.
A new model for retail payments
In the UK, we are already digitising cheques and have had instant payments for many years, however the industry is also making further enhancements to the payments systems which support the country on a daily basis, and setting out design and implementation approaches for the construction of a new ‘National Payments Architecture’.
This is a completely new model for retail payments and how they are carried out by the UK’s payment schemes and market participants. It will be the biggest change to the way payments are processed in the UK since the 1960s, ensuring payments are safe whilst also encouraging competitive innovation and unlocking new business opportunities in everything from smarter uses of banking and payment data, through to new transactional services. The new architecture will be delivered by the New Payment Systems Operator, which will bring together the three current payment schemes of Bacs, Faster Payments and Cheque and Credit Clearing. Meanwhile the Bank of England is also carrying out an upgrade of its Real Time Gross Settlement system at the heart of the infrastructure.
The UK’s payments industry is well placed to adapt to rapidly changing customer expectations and the challenges of digital transformation. It is important that all these changes are considered alongside all other regulatory and strategic initiatives in play. Many of the requirements and changes in the evolving landscape interrelate; the end result needs to be an efficient, competitive and safe financial services market for customers and industry alike. UK Finance is uniquely placed to support the industry as it embarks on all of these changes.