The UK National Payments Vision (NPV) was published last week, setting the tone for the government’s approach to the country’s payments industry, a sector the Labour administration has cited as key to economic growth.
At 40 pages in length, the Vision covers a huge range of areas including Open Banking and fraud, two focal areas for the government and the industry, as well as artificial intelligence (AI) and distributed ledger technology.
Publication was long-awaited by payments and other associated sectors, with the NPV recommended in the Future of Payments Review authorised by former Nationwide CEO Joe Garner late last year. As expected, the NPV has received a warm welcome from the payments sector.
“We welcome the National Payments Vision, it provides the opportunity to have a clear roadmap for payments in the UK that is forward-looking, realistic and enables the industry to focus resources where it will have the most impact,” says Mark Brant, Chief Payments Officer at NatWest, one of the UK’s biggest retail banks.
“As a leader in Open Banking, NatWest is actively engaged in activities focused on the future of payments. The steps that the government has outlined will help unlock growth in the UK economy, ensuring the UK’s global lead is not eroded by a complex regulatory change agenda which inhibits firms from providing innovative services that meet their duty to deliver good outcomes for customers.”
The UK’s Open Banking ecosystem has emerged as one of the world leaders in the space, and the government is keen to see this continue. With the UK economy having grown this year twice by 0.3% and once by 0.1%, political leadership see financial innovation as key to ongoing growth.
Open Banking is in turn seen as one of the country’s best financial innovations, largely due to facilitating account-to-account (A2A) payments but also because of the potential for British Open Banking solutions to be sold overseas to emerging and high-value markets like the US.
To achieve this, the NPV has sought to clarify regulatory responsibilities for Open Banking, putting the onus on the Financial Conduct Authority (FCA). The Vision also focuses heavily on regulatory resilience, not just for Open Banking, but on other areas of financial innovation.
In the long term, the government wants Open Banking to expand beyond the scope of the Competition and Markets Authority’s (CMA) roadmap, which was completed in September.
“It’s time we fully realise the growth potential of digital and accelerating the implementation of Open Banking through enhanced commercial models,” Brant continues.
“In addition to a focus on the core infrastructure to bolster innovation, we support a clear, predictable and resilient regulatory framework to build on the foundations, with a focus on the three pillars – innovation, security and competition in the interests of the UK and the industry.”
Competition at home and abroad
As referenced by NatWest’s Bryant, the government wants to see competition treated as a priority by regulators. With the financial services sector accounting for 9% of the UK’s annual GDP, competition is hardly in short supply.
Competition of course varies from small startups to huge banks like NatWest, but as with any other sector, SMEs form the bulk of these UK financial services enterprises. It is estimated that there were upwards of 80,000 businesses in finance and insurance in the UK in 2023, of which just 235 had more than 500 employees.
The UK Open Banking sector is home to numerous companies; Bud Financial, Plaid, Tink, Yapily, GoCardless, Salt Edge, TrueLayer and Token.io are just a few examples. The government is encouraging regulators, particularly the FCA, to ensure ‘a strong focus on competition and choice’ in its work around Open Banking.
Francesco Simoneschi, CEO and Co-Founder of TrueLayer, comments: “The National Payments Vision’s significant focus on Open Banking and account-to-account payments is a major step toward modernising the UK’s payment infrastructure. Like water, roads and gas, payments are essential to the economy.
“Offering alternatives to outdated card systems will drive cost savings and growth for businesses while enhancing convenience and security for consumers. Now the Vision is published, we look forward to a period of accelerated delivery.”
Modernisation, as alluded to by TrueLayer’s Simoneschi, is one of the core focus areas for the UK government when it comes to Open Banking. Both Labour and its Conservative predecessor have earmarked Open Banking as critical to UK financial modernisation.
The fact that Open Banking has been embraced by both sides of the political spectrum – the two largest sides of it at least – is promising for continued development of the tech. Labour efforts have materialised into legislation in the form of the Data (Use and Access) Bill, highlighted in the NPV.
Modernisation of British finance has been highlighted as a key benefit by other stakeholders as well. Open Banking Limited (OBL), the implementation entity for Open Banking created by the aforementioned CMA order, emphasised the ‘referenced opportunities’ in the NPV to make A2A payments a ‘ubiquitous payment method’.
The NPV’s remit to placing a focus on greater cooperation and collaboration has also been welcomed by various stakeholders. This will be facilitated by the Payments Vision Delivery Committee, a cross-authority body chaired by HM Treasury.
Marion King, Chair and Trustee at OBL, remarked at the time: “The government’s National Payments Vision is hugely welcome, and rightfully identifies the role that Open Banking plays in driving innovation and fostering competition in payments.
“There are 11 million active users of open banking and the ecosystem is already worth more than £4bn to the economy. But we can go further. We must now seize the opportunities before us to move open banking to a sustainable, commercial model, and further solidify open banking’s position in our increasingly digitalised and diverse payments landscape.
“We look forward to working with government and regulators to make this a reality, and stand ready to support the new Payments Vision Delivery Committee.”
The UK may have built itself up as one of the global leaders in Open Banking, but it is not the only one making inroads. The Nordics are a traditional stronghold, whilst Australia has been making its own progress and the US is an emerging market.
It is unclear how the election of Donald Trump – who is very pro-crypto but has never made his opinion on Open Banking clear – will affect US development. However, regulatory developments in the country before this month’s election have laid the foundations for the market to grow at scale.
For both the previous and current UK governments, securing a British podium place in financial services was a priority. This was reiterated by Rachel Reeves, Chancellor of the Exchequer, in her Mansion House speech last week, during which she also revealed the publication of the NPV.
Labour’s NPV has highlighted examples of innovation the UK could follow, namely Brazil’s PIX – a huge success story in its own right – and Sweden’s Swish, both mobile payments systems.
Charles Damen, Chief Product Officer at the abovementioned Token.io, says: “As recognised in the Vision, other international markets – such as Brazil and Sweden – have clearly demonstrated the significant potential and innovation that can be realised from account-to-account payments.
“By outlining a strategic direction for the UK payments landscape and guiding both regulatory and industry activity, the NPV promises to unlock open banking’s ability to spur innovation and competition in the provision of payments, while cementing the UK’s position as a global leader in payments.
“In line with the Chancellor’s recent Mansion House Speech, we agree that the UK must continue to earn its status as a global financial centre through continuous innovation and adaptation within our highly competitive global landscape.”
