HM Treasury has published the long-awaited National Payments Vision (NPV), a long-term outline of the British government’s ambitions for the UK payments industry and setting the regulator tone for the next few years.
Tulip Siddiq, HM Treasury City Minister, responsible for government policy on financial services, explained that the vision responds to the various technological changes that have shaped the UK payments sector in recent years such as the rise of mobile payments.
“I am determined to ensure that the UK is in a strong position to seize these opportunities – doing so will benefit users of these payment systems as well innovative firms across the financial services sector,” the Minister remarked.
Publication of the NPV was announced by Rachel Reeves, Chancellor of the Exchequer, in her Mansion House speech yesterday. Published today, the document includes what Siddiq has called a ‘package of actions to cut through the current regulatory congestion facing the sector.
Siddiq has called on the government, regulators and the sector to work collaboratively to ensure the vision is delivered, mirroring an argument made by Reeves yesterday regarding the financial services sector as a whole. To achieve this, the government will create a senior cross-authority group, the Payments Vision Delivery Committee.
Siddiq summarised: “A world-leading payments ecosystem is a critical underpinning to this government’s central growth mission and its ambition to deliver world-leading rates of GDP growth. This publication sets out our goals for UK payments, and charts a path for achieving these.”
Resiliency in regulation
The government recognises the crucial role that financial services and payments play in the British economy, accounting for around 9% of the country’s annual GDP.
Of course, various other sectors heavily depend on the payments industry to function – both offline and online retailers arguably being the biggest example. Siddiq noted that 50 billion payments were made by consumers and businesses in the UK last year, amounting to 1,500 transactions every second.
To ensure stability for the network underpinning this, the first focus of the NPV is on strengthening regulatory foundations and frameworks. The government envisions a regulatory framework for payments that is ‘clear, predictable and proportionable’.
A joint remit with the Financial Conduct Authority (FCA) and Payment Systems Regulator (PSR) has been established to work towards this. Separately, the government also wants to see more resilient infrastructure, in tandem with resilient regulations.
The New Payments Architecture, the PSR’s proposed new way of organising interbank payments, is a particular area of focus. The government believes that a more ‘agile and flexible’ approach is needed so that the UK can better leverage next generation technologies.
Clarifying the upgrades needed for the Faster Payments System, the UK banking initiative to reduce payment times, is a task for the aforementioned Payments Vision Delivery Committee. The body has been tasked with doing this via work led by the Bank of England (BofE), which oversees the FPS, and the PSR.
We don’t want to sound like a broken record…
With the two topics having dominated UK fintech discussions over the past year, It wouldn’t be a British policy document on payments regulation without mention of Open Banking and fraud prevention.
The vision has outlined three pillars for guiding future government activity around payment- innovation, competition and security. The government has built on this by providing direction on its priority initiatives in the Open Banking and fraud areas of retail payments.
Starting with Open Banking, this has been a focal area of both the previous Conservative government and the new Labour one. Labour mentioned Open Banking in its July election manifesto, and has now followed through with legislation around data sharing.
The vision sees Open Banking as playing a vital role in delivering seamless account-to-account payments, something that the government in turn sees as crucial to driving the British economy forward.
Progress on Open Banking in the UK is long-running, with the government noting that it has 11 million current users across both individuals and businesses – tax payments are a notable area. As the market continues to develop, the government has asked the FCA to take on primary regulatory responsibility for Open Banking.
Fraud prevention, meanwhile, is an area that has caught a lot of attention at the industry, regulatory and government level. HM Treasury introduced new powers for banks to combat fraud last month, shortly after the PSR’s new reimbursement requirement on authorised push payment (APP) fraud came into effect.
On fraud, the government also expects the FCA to take a lead in solving overlaps between itself and the PSR. It has also reiterated its viewpoint, outlined by Labour prior to the election according to the Financial Times, that tech and telecommunications firms should also play a role in tackling authorised push payment (APP) fraud.
A long-time coming but a long wait still ahead
The payments industry has been waiting for the vision for some time, with it being one of the key recommendations of the Future of Payments Review, written by Joe Garner (former Nationwide CEO) during the previous Conservative administration.
“We welcome the government’s publication of the National Payments Vision (NPV), signalling a renewed drive to deliver better outcomes for end users and drive growth for the UK economy,” said a spokesperson for Pay UK, the organisation which runs the UK’s retail payments operations.
“The NPV provides crucial clarity on the Government’s ambitions for UK payments, including modernising interbank retail payments infrastructure and enhancing regulatory coordination. Pay.UK is committed to working with the payments industry and regulators to achieve the Vision’s goals, fostering competition and innovation to power payments and deliver benefits for people and businesses across the UK.”
“The establishment of the Payments Vision Delivery Group is a key step towards regulatory coordination and a shared strategic direction. As we have previously stated, it is vital to establish clear roles, responsibilities, and accountability for successful implementation. Pay.UK looks forward to working collaboratively to develop a modern and sustainable payments infrastructure for the UK.”
HM Treasury states that today’s announcement shows that ‘the government’s response is clear’, and that UK leadership is committed to facilitating “a world-leading ecosystem must ensure trusted payments, delivered on next generation technology, with more choice for consumers and businesses”.
Today’s National Payments Vision shares many overalls with Reeves’ Mansion House speech yesterday, unsurprisingly. Both reiterated the need for greater cross-sector and regulatory collaboration, regulatory resilience and fraud prevention.
Politics and regulation are a long process, however, and it will take some time before the full impact of the reforms mapped out in Labour’s vision will come into effect. Hopefully for the country’s government and industries its international competitors will not have caught up or overtaken it before then, particularly in the area of Open Banking.
