National Payments Vision: navigating the regulatory maze in UK payments

On 14 November 2024, the government published the National Payments Vision (the “NPV”), outlining its ambitions and strategic roadmap to establish the United Kingdom as a world-leader in the global payments ecosystem. The NPV addresses the findings of The Future of Payments Review 2023, chaired by Joe Garner (the “Garner Review”). The Garner Review was an independent review reporting on how payments are likely to be made in the future and setting out the steps needed to successfully deliver world leading retail payments.

Tulip Siddiq MP, Economic Secretary to the Treasury, set out in her ministerial foreword the government’s key themes of security, resilience and innovation when it comes to the UK’s payments landscape and discusses how we can further strengthen these themes.

Payments

The NPV explains that payment systems and providers “allow money to flow through the economy, enabling the exchange of value on which economic activity relies”. With the NPV stating that 50 billion payments were made in the UK last year by consumers and businesses, it comes as no surprise that the payments sector is crucial to strengthening the UK’s economy and should be prioritised.

Pillars and themes

The Garner Review flagged that the UK is at risk of falling behind other international nations and part-attributed this to a lack of strategic planning and direction. The government has clearly recognised this as an issue and makes references throughout the NPV to other nations, such as Sweden and Brazil, whose infrastructure and payments landscape is further advanced, and speaks about the UK’s potential to catch up.

Throughout the NPV, the government considers and reiterates three key themes, or ‘pillars’ – innovation, competition and security. The NPV also speaks about the need for the UK to have a strong foundation in order to become a world-leader in the payments space and that this will come from a combination of resilient infrastructure and a clear, predictable and proportionate regulatory framework.

Regulatory congestion

A key point flagged in the Garner Review is the current ‘regulatory congestion’ in the payments space.

The government, industry and three UK financial regulators (the Bank of England, the Financial Conduct Authority and the Payments Systems Regulator) currently all lead a number of initiatives which are contributing to the regulatory congestion in the payments ecosystem. While the Garner Review and NPV recognise that each of these individual initiatives has its own merits, the collective impact of these initiatives is seen as hampering growth and innovation, rather than encouraging it.

The NPV flags two ways of combatting this – improving coordination between the regulators and developing a strategic and central vision going forward. To that extent, a joint remit letter was issued by Rachel Reeves, Chancellor of the Exchequer, on 14 November 2024 to the FCA and PSR setting out the government’s recommendations as regards payments regulation and to provide the regulators with a ‘strategic steer’.

The BoE, FCA and PSR published a joint response to the NPV on 14 November 2024 stating that the three regulators welcome the NPV and look forward to building on their current working relationships.

Infrastructure

The government is looking further afield to countries such as Sweden and Brazil whose payments landscape and infrastructure is far more innovative and developed and aims for the UK to catch up. The NPV cites Sweden’s Swish app and Brazil’s PIX service as examples of innovative technologies contributing to the respective countries’ infrastructure. Upgrading and developing the UK’s retail payments infrastructure to make it more resilient and secure is a priority emphasised in the NPV, mirroring and agreeing with the Garner Review’s statement that “…the economy cannot grow without the payments infrastructure to support it”. In the short term, the government sees that it should be more involved in decisions relating to payment infrastructure than it has been in the past.

What the NPV has already stated is that the government is not looking to overhaul the current infrastructure that is already in place, but instead is looking to prioritise the development of a more “agile and flexible approach”. There also appears to be agreement that significant investment in the current infrastructure is required in order to support and further the two pillars of competition and innovation. The NPV also flagged that consideration should be given to the interoperability of different payment systems, both domestically and internationally.

Payments Vision Delivery Committee

In order to facilitate the development of the UK’s payments infrastructure and move things forward, the government has created the Payments Vision Delivery Committee (the “PVDC”), to include senior members of the BoE, FCA and PSR and be chaired by HM Treasury. The PVDC will be primarily responsible for managing coordination between the three regulators. The government intends for the committee to outline proposals as regards the development of the UK’s retail payments infrastructure and to publish a plan of future initiatives in relation to regulatory requirements in the space within the period of 9 – 12 months, the length of time for which the PVDC has currently been set up to run.

Open banking

Open banking involves the provision of access to certain financial accounts and information to third-party providers, other than an individual’s bank, for them to provide useful and innovative services. Open banking in particular is a high priority area for the government, as set out in the NPV, with advances needing to be made so as to not fall behind other countries. The Garner Review signalled for developments to be made to account-to-account payments in the UK and the government have stated in the NPV that such developments are crucial.

To facilitate the development of open banking, the government has asked the FCA to be the UK’s sole regulator of Open Banking Limited – the organisation established as a result of the Competition and Markets Authority’s retail banking market investigation and responsible for implementing and maintaining the UK’s open banking standards. It has also asked the FCA and PSR to commit to and consider how they can further develop open banking and make account-to-account payments “a ubiquitous payment method”.

Digital pound

While no decision has been taken yet, the NPV sets out the government’s commitment to continue exploring the introduction of the digital pound, a new retail Central Bank Digital Currency which would take the form of a digital banknote issued by the BoE. The introduction of the digital pound would presumably foster innovation in the UK’s payments landscape and would be a potential complement to cash, not a replacement.

The government continues to work alongside the BoE in the current design phase exploring the digital pound and considering whether it should move to the implementation phase.

Commitment has already been given in the NPV that any decision to introduce the digital pound would be accompanied by new primary legislation that would be subject to extensive scrutiny by the House of Commons and House of Lords, as well as public consultation. Any such legislation would guarantee users privacy and control of their money.

Preventing fraud

As tends to be the case across the board, prevention from and protection against fraud remains of paramount importance for the government. The Garner Review highlighted that continuing efforts need to be made to tackle the issue of fraud and reduce regulatory overlap and congestion in the area.

Calls have been made to the relevant financial regulators along with those in the technology and telecoms sectors for “demonstrable action to reduce the scale of incidents and losses from fraud”. These actions will be reviewed in March 2025 at the next Joint Fraud Taskforce – query whether substantial actions will have been implemented during this tight period  of time despite mounting government pressure. What is vital is that any such actions must not hamper innovation in the payments sector, but instead work alongside and facilitate innovative strides being made.

 Concluding thoughts

The NPV signals a welcome step in the right direction from the government to ensure the UK remains a world leader in the payments space. What remains to be seen is how far the government will commit to delivering on many of the ideas proposed in the NPV and the extent to which it pushes innovation and development in the space.

While work outlined in the NPV is yet to begin, the government’s commitment combined with the intention for strategy and clarity in the payments sector provides a solid foundation for the UK going forward.

This piece was written by Sanya Bhambhani with input from Henry Humphreys.  Do please reach out to a member of the HLaw team if you would like to discuss matters relating to FinTech generally.

All the thoughts and commentary that HLaw publishes on this website, including those set out above, are subject to the terms and conditions of use of this website.  None of the above constitutes legal advice and is not to be relied upon.  Much of the above will no doubt fall out of date and conflict with future law and practice one day.  None of the above should be relied upon.  Always seek your own independent professional advice.

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