In an in-depth review initiated on July 10th, the HM Treasury has conducted a thorough analysis of the UK’s payments landscape and published their Future of Payments Review. Over three months, the review team, led by a seasoned executive with diverse experience in the financial sector, engaged with about 150 stakeholders, including financial institutions, Fintechs, Big Tech companies, telecommunications firms, consumer groups, regulators, retailers, merchants, and trade associations. The review also included roundtables and over 60 submissions in response to a call for input, reflecting a broad spectrum of insights and perspectives.
Key Findings and Observations
- Consumer Retail Payment Journeys: The review focused on identifying the most important consumer retail payment journeys today and in the next five years. It assessed the UK consumer experience in comparison with other leading countries, scrutinising existing plans and initiatives in the payments landscape.
- Coexistence of Cash and Digital Payments: While acknowledging the relevance of cash (highlighted in over a third of submissions), the review chose not to duplicate ongoing work on cash access but to focus on the broader digital payments landscape.
- Avoidance of Overlapping Issues: Topics like cryptoassets, large corporate payments, Buy Now Pay Later (BNPL), and international payments were not the focus, considering their extensive coverage elsewhere.
- Big Picture Analysis: Instead of analysing each in-flight initiative, the review looked at the overall impact these initiatives could have on shaping the future of payment journeys in the UK.
- Payments as the Central Nervous System: Emphasising the crucial role of payments in the financial ecosystem, the review highlighted the need for a resilient, scalable, and secure payments infrastructure.
Key Recommendations
- National Payments Vision and Strategy: The primary recommendation is the development of a comprehensive national strategy to bring clarity and direction to the UK’s payment landscape.
- Consumer and Retailer Focus: The review suggests improving the consumer-to-consumer bank transfer process and addressing merchant frustrations with card payment costs.
- Open Banking as a Key Innovator: The potential of Open Banking to revolutionise person-to-person transfers and provide alternatives to card schemes was acknowledged, emphasising the need for consumer protection and viable commercial arrangements.
- Regulatory Oversight and Alignment: Recommendations include a review of new APP fraud rules, setting ambitious fraud reduction targets, and ensuring regulatory clarity for Fintechs.
- Future Trends and Opportunities: The report foresees a major role for technology and Big Tech in redefining payments, suggesting that digital wallets like Apple Pay and Google Pay may indicate a significant shift in the industry.
In summary, HM Treasury’s Future of Payments Review highlights the UK’s strong position in the payments sector but underscores the need for a clear vision and strategy to maintain and enhance this position. The recommendations aim to simplify the payments landscape, foster small business growth, frictionless trade, and Fintech innovation, and ultimately support the UK’s position as a leader in the global financial landscape.
