In November this year, HM Treasury (HMT) published a report, ‘The Future of Payments Review 2023’, commissioned by Joe Garner. The report looked at the UK’s payment landscape, focusing on several key themes and providing a total of ten recommendations for consideration.
In this blog, we provide a summary of the findings and recommendations of the report.
In recent years, the UK has experienced a huge digital transformation, leading innovation in key areas such as Open Banking and real-time payments. The fact that new players are competing with traditional financial institutions creates a great opportunity but it is not without its challenges and requires careful consideration.
The UK’s payments landscape is secure, resilient, and reliable. However, the report concludes, there is a lack of vision and clarity on what’s next.
Therefore, the first and most important recommendation Garner has made is for the Government to develop a national strategy and vision that considers consumers’ needs, and the investment that has been made in the industry:
“A National Vision and Strategy should define clear guiding principles such as safety, simplification, coordination of initiatives, responsiveness (to innovation), inclusivity (to build broad alignment on priorities) and accountability to drive progress lead by HM Treasury.”
We have summarised the three areas of focus of the report below.
Consumer experience
As we move to an online payment environment where paper money and physical cards are relegated to second place, the UK needs to ensure that consumers are not excluded from this new environment, providing alternatives for those that require them and ensuring that consumers are protected from fraud. There is a strong case for the UK to move to a more outcomes-based guidance approach that facilitates the customer experience.
Open Banking
The current conditions in the UK, where customer-to-customer bank transfers are not particularly smooth and the costs of taking card payments are high for merchants, do not create the best conditions for Open Banking. The top priority therefore should be, to improve the transfer experience and to provide alternatives to card payments that are commercially sustainable.
A separate area that requires close examination is the consumer protection gap. The UK needs to ensure there is a minimum level of purchase protection when using Open Banking and the report suggests the creation of a dispute mechanism.
Regulatory oversight
The UK payments market is heavily regulated. On the one hand, this is of benefit to the country as it is seen to have a strong and stable regulatory framework. However, on the other hand, the number of overlapping initiatives coming from different regulators poses a significant regulatory burden for firms. The report concludes that an environment that avoids this burden, and where regulators are aligned in their requirements, will benefit the industry, especially smaller players.
Author: Alejandra Gorria, Manager
The report encourages the development of a National Payments Vision and Strategy to bring clarity into the UK payments landscape and it is now in the hands of the Government, HMT, and the regulators to consider how to tackle the recommendations in a tangible way.
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