A year ago, a government commissioned report in the UK asked for a National Payments Vision and Strategy, or NPVS for short. Looking into this a year later, there does not seem to be much action. The report was produced by Joe Garner, founder of a start-up in the dot.com boom, a director at the retailer Currys, CEO of BT’s Openreach, and finally at both HSBC UK and Nationwide Building Society as CEO. You would think some action would have happened. I can’t find any yet.
Why does the UK need a payments vision? Well, it kind of goes back to the UK government seeing the transformation in India by a co-ordinated government implemented of digital identity (Aadhaar) and unified payments infrastructure (UPI). This changed India from a nation of excluded to included. From 2010-2018, Indians with access to digital payments transformed from 35% to 82% of the population, and the UK government felt that the lack of a clear co-ordinated direction for payments was a missed opportunity. So, they hired Joe to lead the investigation and here’s what was the agenda:
Goal
To guide the industry and regulatory sectors towards a world-leading payments ecosystem
Focus
To streamline the payments system, address fraud, and ensure a secure and efficient financial infrastructure
Incorporation
To incorporate feedback from the Future of Payments Review and industry engagement
The NPVS should ensure that:
- People can make and receive payments in ways that suit them
- People and businesses are protected when they make payments
- There is effective competition in payments
- Payment systems are efficient and commercially sustainable
So, Joe’s report was published last November and, in an update in March 2024, UKGov said that they would publish the vision asap.
Well, it’s not here yet, but I’m sure it’s coming. Having said that, it may have changed a bit due to the change of government. So, just leaving this here, so you can see the thinking of what is recommended, and here is the executive summary from Joe Garner’s report a year ago:
A world leading payments environment is vital for a world leading economy and a healthy society. The economy cannot grow without the payments infrastructure to support it. The ability to send and receive money must be resilient, reliable, scalable, adaptable, secure, trusted, fast and convenient for trade to thrive at every level of the economy. And as consumers, each of us relies on the above every day to shop, travel and work in the way that we do today.
“The UK is in a good place today, but without a National Payments Vision and Strategy, we cannot be confident in the future.”
Overall, we conclude that the UK payments landscape is in a good position today with many positives. First and foremost, the payments environment has a long track record of security, reliability, and resilience. The UK has historically been a leader on innovation in areas such as real time payments and Open Banking. Our terms of reference ask the question “Looking at the in-flight plans and initiatives across the payments landscape, how likely are they to deliver world leading payment journeys for UK consumers?” We found many well intended in-flight initiatives which all make sense in isolation, but in the course of our work, we could not find a clear agreed vision of what they are aiming to achieve in aggregate. Without question the strongest piece of feedback we received through this review is that the UK’s payments landscape lacks vision and clarity of priorities. This lack of vision and strategy means that it is hard to have high confidence in achieving a coherent outcome in 5-10 years’ time.
Our strongest recommendation is therefore that the Government develops a national payments vision and strategy – particularly considering; i) the criticality of payments to consumers and the economy, ii) the many billions of pounds being invested and iii) the highly interdependent nature of the payments arena. This work should have a primary aim of simplifying the landscape over time. A healthy payments ecosystem is essential to a healthy competitive economy. With a clear vision for the future, payments can help unlock GDP growth through fostering small business growth, frictionless trade, and Fintech innovation.
“The UK consumer benefits from a world-leading payments experience today – but it could be even better.”
Turning to the specific payments journeys we were asked to consider; the picture is mixed. On the positive, the UK has a relatively mature banking, cards and digital wallets environment, and a well-developed regulatory environment. Taken together this means that from a consumer point of view, the UK holds a leading position for the purchase experience of goods and services – both in-person and online. We make some recommendations regarding Strong Customer Authentication (SCA) requirements that we believe can make things even smoother for consumers at the point of purchase.
We are supportive of the work to preserve access to cash, and are concerned that digital exclusion could be adding to the financial exclusion problem. We are asking that these issues are closely monitored.
On the negative, there are two significant issues in the retail space that need to be addressed. First, the consumer-to-consumer bank transfer process is clunky (relative to international comparators) with the need to enter account numbers and sort codes. This needs to be improved in the coming years. Second, many merchants and retailers are frustrated by the costs of taking card payments, and the lack of viable alternatives.
“Open Banking can help improve both person-to-person bank transfers and provide an alternative to the card schemes, but only if the lack of consumer protection and commercial arrangements are addressed.”
Firms and Fintechs are starting to innovate and use Open Banking capabilities to improve the bank transfer experience for consumers. Our work leads us to believe that – with some adjustments – Open Banking could help improve the consumer-to-consumer process and (in time) provide an alternative to the card schemes for retailers. However, there is currently no consumer dispute resolution process for Open Banking transactions, and we believe this will be a barrier to adoption if not addressed. Likewise, the current commercial arrangements do not create the conditions for Open Banking to thrive in a healthy way, with costs and benefits misaligned. If these issues can be addressed, we are optimistic about the scope for innovation and believe that the UK can use Open Banking to capture a world leading position once again in these areas.
“Even ahead of a National Payments Vision and Strategy, there are some actions that can be taken to declutter the environment and accelerate progress.”
The UK has a well-developed payments environment, but it is also very complex with multiple industry and regulatory bodies. We make some suggestions on how to improve alignment and prioritisation with the intention of freeing up more space for innovation. We are advocating that on the high-profile issue of frauds and scams, we increase the focus on preventing the crime in the first instance, and closely assess the impact of the new Authorised Push Payment (APP) fraud reimbursement rules.
“A technology inflection point?”
Finally, throughout this work we have observed how technology in general, and Big Tech in particular, are redefining not just payments but financial services in the process. In 1994 Bill Gates predicted that technology firms will ‘bypass’ banks. The extremely rapid adoption of digital wallets (e.g. Apple and Google Pay) may indicate that we are at an inflection point. We concluded that this presents as much opportunity as threat and encourage an open and collaborative dialogue in the best interests of consumers, businesses, and the wider economy.
In summary, the UK has the opportunity to create a world leading payments environment long into the future. But to do this we need to cut through the complexity and work towards a new shared vision consistently over the long term.
Summary of recommendations
The primary recommendation is that the Government develops a National Payments Vision and Strategy to bring clarity to its future desired outcomes for UK payments.
A key aim of this strategy is to simplify the landscape. Although total payments have grown slowly over time to £47.5bn last year, there have been rapid shifts – most notably from cash to debit cards. Additionally, payments through the Faster Payments System have also grown as they have progressively also replaced cheques. These trends are forecast to continue – albeit at a more moderate rate – over the coming years.
Consumer Experience and opportunities to improve
Recommendations 1 & 2 are concerned with improving the consumer shopping experience by moving SCA requirements away from detailed technical standards for the Financial Conduct Authority (FCA) to supervise via an outcomes-based approach. This can improve the shopping experience and further reduce fraud.
Recommendation 3 asks that HM Treasury and the FCA regularly assess whether digital exclusion is leading to financial exclusion. The position is evolving rapidly and needs to be closely monitored.
Open Banking and opportunities to exploit more fully
Recommendation 4 is that consumer protection on payments made via Open Banking is enhanced with a minimum form of dispute resolution. This will create the trust and security that consumers need to adopt Open Banking solutions.
Recommendation 5 is that Open Banking is leveraged to improve the personto- person bank transfer payments journey. We believe that Open Banking journeys can rival the best in the world – if we focus on them.
Recommendation 6 is that an Open Banking alternative payment journey is developed to give retailers choice beyond card schemes. In addition, that the Payment Systems Regulator (PSR) complete their work investigating card scheme fees. If choice can be created, we believe that merchant dissatisfaction will decrease.
Recommendation 7 is that the Government and Joint Regulatory Oversight Committee (JROC) prioritise agreement of a commercial model for Open Banking so that there is scope to invest in both infrastructure and consumer protection. Without sustainable financials, it is hard to see that Open Banking can thrive over the long term.
Improving regulatory oversight and alignment would allow for more efficiency and innovation
Recommendation 8 is that the PSR conducts a review of the new APP fraud rules after 12 months of implementation and we are suggesting that the Government set a more ambitious fraud crime reduction target beyond 2024. The emphasis should be to prevent the crime in the first place.
Recommendation 9 is that HM Treasury and the regulators review whether the way some current regulatory requirements are applied to Fintechs is clear and appropriate. If we can reduce the complexity for smaller firms, they will grow more rapidly.
Recommendation 10 is that HM Treasury and the regulators take a variety of actions to drive closer alignment of regulatory activity, including through updated remit letters, enhancing the regulators’ existing Memorandum of Understanding, ensuring cross-pollination at Board level and working to reduce the regulatory initiatives impacting firms by an aspirational ambition of 10%. The intention is to free up more capacity for innovation.
You can download the full report here.
There’s also an interesting report produced by Finextra for Sibos if you are interested. This Sibos 2024 special edition report, was produced with contributions from Accenture, Deloitte, EBA CLEARING, Finastra, FIS Global, Investec, J.P. Morgan, Oesterreichische Nationalbank, PPI AG, Swift, and Wise, and explores:
- The evolution of instant payments in 2025;
- The modernisation correspondent banking and cross border payments;
- Preparing the upcoming EU payments legislation;
- The key to successful digitalisation;
- The technology innovations reshaping the payments sector.
