The UK government has announced a review on the topic of ‘future of payments’ ahead of making recommendations on what it describes as ‘steps needed to successfully deliver world-leading retail payments, further boosting UK fintech competitiveness’.
The review will be chaired by Joe Garner, who ran the British mutual financial institution Nationwide Building Society until last year, and will attack the topic primarily through a ‘consumer needs’ lens – meaning both individuals and businesses making and receiving retail payments.
The ‘Future of Payments Review 2023’ will seek to answer three specific questions: what are the most important consumer retail payment ‘journeys’ both today and in the next five years? (‘for example, paying a friend, paying a bill, paying businesses for goods and services, in the UK or internationally, etc’); ‘for these journeys today, how does the UK consumer experience for individuals and businesses compare versus other leading countries?’; and ‘how likely are in-flight plans and initiatives across the payments landscape to deliver world-leading payment journeys for UK consumers?’.
The government has published a ‘call for input’, which closes on 1 September, to inform the review.
HM Treasury (HMT) will provide the secretariat, with Garner – who was CEO of Nationwide for just over six years, having previously worked in the private sector for Openreach (part of telecoms giant BT Group) and bank HSBC – asked to provide a report and recommendations in the autumn.
RELATED ARTICLE UK fintech’s centre forward: a fireside chat with Ezechi Britton – a write-up of a fireside chat at the Global Government Fintech Lab 2023 (on 18 May) with the chief executive of the (UK) Centre for Finance, Innovation and Technology (CFIT)
Retail payments’ evolution under scrutiny
The Future of Payments Review’s terms of reference describe payments as ‘at the heart of a dynamic and changing financial services sector’.
The review is asked to consider areas including how the UK’s retail payment systems and networks need to evolve to ‘catalyse innovation in payment services’; ensure accessible and inclusive digital payments; and ensure resilient and secure payments.
There is also a focus on interoperability with ‘new forms of digital money, including insofar as the role of banks is concerned’, and with global payment systems. But the review is not considering so-called stablecoins or central bank digital currency (CBDC) policy (HMT is working closely with the Bank of England on exploring the possibility of a digital pound).
The review is asked to ‘take into account developments in the UK payments industry’s New Payments Architecture (NPA), which is being procured by Pay.UK, and may make recommendations building from (not replacing) NPA plans’. NPA will be a new way of processing payments in the UK, replacing the ‘Faster Payments’ scheme. Pay.UK was known as the New Payment System Operator (NPSO) until 2018.
The review ‘may’ also consider ‘steps needed to build from’ the UK Joint Regulatory Oversight Committee (JROC)’s report on the future of open banking (published in April) ‘to drive uptake in retail account-to-account payments, that is, payments directly from a bank account without using a debit or credit card’.
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Government rejects MPs’ crypto ‘gambling’ verdict
In a separate development in the UK, the House of Commons Treasury select committee on 20 July published the government’s response to its report on regulating crypto-currencies.
In its 28-page ‘Regulating Crypto’ report (published in May) the cross-party committee of MPs called for consumer trading in unbacked crypto to be regulated as gambling. Given their price volatility and the risk of losses, the committee concluded that retail trading in crypto more closely resembles gambling than a financial service – and should be regulated as such. The committee stated concerns that regulating crypto trading as a financial service – as proposed by the government – would create a ‘halo’ effect, leading consumers to believe this activity is safe and protected, when it is currently not.
In an eight-page response, the government states that it ‘firmly disagrees’ with the committee’s recommendation and re-affirms an intention to regulate crypto trading as a financial service. ‘Such an approach would run completely counter to globally agreed recommendations from international organisations and standard-setting bodies, including the International Organisation of Securities Commissions (IOSCO) and the G20 Financial Stability Board (FSB),’ the government states, adding that the committee’s proposed approach would also ‘potentially create unclear and overlapping mandates between financial regulators and the [UK] Gambling Commission.’
‘A financial services regulatory framework is more appropriate for addressing the risks of unbacked crypto-assets and creating the conditions for safe innovation. This can – and will – come with a set of robust measures to mitigate consumer risks mentioned in the committee’s report, including the risks of “consumers getting misinformed”, the government’s response states.
‘The government is already taking concrete action on this, through the introduction of a dedicated financial promotions regulatory regime for crypto-assets: legislation was laid before Parliament and debated last month [June 2023], and will be in force by late 2023.’
