UK government publishes findings from the Future of Payments Review
The Future of Payments Review recently published its report, calling on the UK government to implement a national payments vision and strategy, with the aim of simplifying the landscape over time.
The UK government has published its Future of Payments Review. Image source: Gov.uk
Commissioned by the UK chancellor and launched in July this year, the report has been authored by Joe Garner, former CEO of HSBC UK and Nationwide Building Society, and saw contributions from more than 100 UK-based financial institutions and fintech firms.
The “strongest” feedback received through the review was a lack of vision and clarity of priorities regarding the UK’s payments landscape.
By considering the importance of payments to consumers and the economy, the “billions of pounds” being invested, and the “interdependent” nature of the sector, Garner stresses as a top recommendation that the UK government should provide high level guidance on priorities, so that both the regulators and the industry can align themselves towards achieving definitive outcomes.
On open banking
Garner highlights two underlying issues – one being the lack of a consumer dispute resolution process for open banking transactions; and current commercial arrangements which seem to hamper the growth of open banking.
To that end, the report recommends the government and the Joint Regulatory Oversight Committee (JROC) agree on a commercial model for open banking for it to survive in the long run.
“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,” the report states.
The report also recommends developing an alternative open banking payment journey “to give retailers choice beyond card schemes” with merchants being hampered by the cost of taking card payments and a lack of alternatives.
It’s all about the consumer
In the retail space, Garner admits that while the UK enjoys a “leading” position in consumer purchasing experience, driven by cards and contactless payments, there is still scope to improve.
As a key recommendation to the HM Treasury, the report states it should accelerate the process of removing detailed technical standards and moving to regulatory rules/guidance, as a way to encourage firms to “innovate to achieve the outcome” rather than blindly following rules that could lead to sub-optimal gains.
In terms of payment rails, Garner notes how other countries, such as Switzerland and the US, are working to offer local alternatives to big tech players – such as Mastercard, Visa, Apple and Google – all of whom are also enjoying a strong position in the UK.
The report also highlights the risk of digital and financial exclusion, including reduced access to cash as a consequence of smartphones becoming “increasingly central” to payments. It recommends the HM Treasury and the Financial Conduct Authority (FCA) “regularly assess whether digital exclusion is driving financial exclusion more broadly and market developments in this area”.
With respect to fraud, the report recommends regulators, including the Payment Systems Regulator (PSR), to formally review costs and benefits of the new fraud and scam rules after one year.
In conclusion
Reacting to the report, the UK’s Payments Association welcomes its recommendations and draws similarities to its own Payments Manifesto, which was released in October.
“There are too many conflicting and overlapping initiatives, too many stakeholders fighting their own corners, and not enough protection for consumers making payments between bank accounts,” comments Tony Craddock, director general of The Payments Association.
“If we can implement the recommendations of the Garner Report we will steer clear of the cliff edge and help to re-establish the UK’s leadership in payments. Everyone will benefit – from greater security, lower fraud and a more innovative payments ecosystem.”
