Next steps for digital payments in the UK

This morning, Genevieve Marjoribanks, Head of Policy at the Payment Systems Regulator delivered a speech titled ‘next steps for digital payments in the UK – innovation, inclusion, security and regulation’ at the Westminster Business eForum.

A full transcript of the speech can be found at:

If you missed today’s Westminster Business Forum event Genevieve’s speech is an excellent insight into the current thinking of the payments regulator.

The key take away’s from Genevieve are:

The Coronavirus pandemic has reset the regulatory focus 

Whether protecting access to cash in isolated communities or working to prevent authorised push payment fraud, we are working to support the smooth functioning of the UK economy during one of its biggest ever challenges.

The Coronavirus pandemic is having a devastating effect on people all over the world. Now public bodies and industries have a responsibility to help them recover, and the financial sector is working to offer vital lifelines to consumers in need.

Genevieve Marjoribanks, Head of Policy, Payment System Regulator 

Regulatory recognition of swift industry innovation

The pledge by Barclays, NatWest, PayPoint and Sainsbury’s Bank to maintain free to use ATMS despite the 50+% reduction in cash withdrawals via an ATM is recognised.

Recognition that the opportunity to pay for shopping without having to touch a POS device or handle cash through the increased Contactless limit to £45 will be regarded positively by some shoppers.

The launch of Starling Bank’s Connected card is noted as a way to give someone they trust a second debit card to buy groceries and other essentials on their behalf.

Quite correctly Genevieve stresses that rather than innovation for innovations sake the key focus should be innovation that benefits a wide range of society. 

This view supports the of the PSR’s three key 2020 objectives:

To promote the development of and innovation in payment systems, including the infrastructures that are used for these systems. 

New Payments Architecture

Helpfully, the PSR used their speech at the event to share some of the current regulatory thinking on the proposed New Payments Architecture (NPA) for retail schemes in the UK.

From the speech transcript we can glean the following insights on regulatory thinking:

  • The original NPA Blueprint outlined an ambitious plan for developing a more innovative and competitive interbank payments environment, underpinned by a resilient and sustainable infrastructure.
  • Faster Payments was at the forefront on the Faster / Instant Payments wave and has been emulated across the globe (circa 50 countries).
  • The adoption of ISO20022 and the use of API’s will help maintain the UK’s position as a payments leader.
  • The PSR is supportive that the NPA vision remains the way forward.
  • Pay.UK has the challenge of developing the NPA ecosystem and “it must consult existing Bacs and FPS participants as well as future participants and users on the NPA scope and trade-offs which could arise in terms of competition, user benefits versus costs and implementation timelines.”
  • The COVID-19 pandemic will add an additional layer of complexity for the NPA programme.
  • The PSR mandate to use ISO20200 within the central architecture for Bacs and Faster Payments within the NPA is regarded as a good decision. The PSR note that this standard has been, or is being, adopted for payments in many places, such as the Single Euro Payments Area, the USA, Australia, and in the new planned P27 pan-Nordic payments system.
  • The use of ISO20022 and a defined ‘Common Credit Message’ for domestic payments is seen as a driver for innovation, new opportunities, increased consistency and interoperability.
  • Given that industry determined the NPA the PSR notes that Pay.UK needs to ensure that the NPA’s design and governance arrangements are fit for purpose. The PSR goes as far as stating that “working closely with the Bank of England, the PSR will continue to focus on how the NPA design, development and build phases will meet our own objectives of promoting competition and innovation, and addressing the needs of system users, as well as being highly resilient.”
  • The significant change that NPA will deliver in these times needs to be managed carefully and proportionate decisions made between the realisation of benefits as soon as possible and transition costs and risks.

Confirmation of Payee

In her speech Genevieve recognises the implementation of Confirmation of Payee.

The ability to be able to check the name on a payee’s account as well as the sort code and account number and being able to confirm that the name they’ve entered matches the one on the account they’re intending to pay is noted as a useful tool to help prevent payments going to the wrong account, whether accidentally or due to authorised push payment, or APP, scams.

In light of COVID-19 and the impact it has had on industry, the PSR decided to not take any formal action on institutions that did not achieve the March 2020 deadline before the end of June 2020 as long as banks met two conditions. The two conditions are that institutions continue to take appropriate steps to implement Confirmation of Payee and ensure that customers are not disadvantaged by any delay, including an expectation that fraud victims would be reimbursed where Confirmation of Payee could have prevented the fraud.

The PSR note some good implementation progress and reports some really encouraging signs of Confirmation of Payee’s effectiveness, with early reports suggesting it has already played a significant role in reducing APP fraud. 

Consistent with this view, recent media coverage reported tat Lloyds Banking Group had seen a reduction in the number of completed APP scams by nearly a third.

Consistent with the view expressed by Northey Point the PSR want to see the full benefits of Confirmation of Payee being realised by a full roll out of CoP across the industry.

Regulatory Insight into Other Innovations

In the final part of Genevieve’s speech we can obtain regulatory insight into:

  • The regulatory imperative of ensuring that those who want to can continue to access and handle cash – with solutions in place that seek to protect the vulnerable in society.
  • A new pre-authorised cheque encashment service at the Post Office called ‘Fast PACE”.
  • The ability to obtain cash from non-ATM sources using QR codes.
  • The PSR’s desired benefits of the yet to be launched Request to Pay (RtP or R2P) scheme.

Innovation is still possible in these testing times

Genevieve concluded her speech by suggesting that even in testing times, the financial sector can still innovate and expressed a view that the payments sector will continue to deliver fresh ideas, new concepts and innovative products and services.

All with the Payment Systems Regulator ‘striving to ensure that payment systems work well for everyone now and in the future’.

A full transcript of the speech can be found at:

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