We are living in a time of unprecedented change in payments. We are seeing cost pressures across all industries, allied to a major shift in customer expectations and experiences. This is driving a focus on digitalisation and innovation, but at the same time we must continue to focus on the need for inclusion (Digital and Financial) and protecting the consumer.
Our clients are responding by reviewing their business models and embarking on transformation to be more agile and adaptable to new customer demands, evolving technology and future proofing their infrastructure.
PwC collaborated with UK Finance and the industry to produce this strategy paper on the future of payments in the UK. More than 100 practitioners from more than 40 firms contributed with energy and enthusiasm to the creation of this report. It sets out the 10-year vision for the industry and how, enabled by technologies that are already available, it can evolve to drive competition, efficiency, and improve experience while continuing to ensure that the ecosystem is safe, secure and resilient. I encourage you to read this exciting report and join the debate.
Jon Maskery
PwC Financial Services Partner, UK Head of Payments
Our Vision
Our vision for 2030 is for customers to benefit from the most modern, resilient and safe payments systems in the world, enabling competition, innovation, choice and opportunity. We will harness common standards, open technology and a payments industry with a culture of collaboration, a resilient and sustainable ecosystem that works well for everyone.
To achieve our vision, we have identified nine enablers linked to 24 recommendations (detailed in the report). These outline what the payments industry seeks to achieve in collaboration with relevant stakeholders to deliver the positive outcomes for consumers and businesses.
1,000+ Payments per second in 2019
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Delivering customer benefits
Our vision for 2030 is supported by the desire to ensure all customers have access to digital payments and, if they choose to, are able to benefit from them. We know some personal customers will continue to need to use cash and we remain committed to making it available to them. Customers should have a frictionless experience between different payment types giving them maximum flexibility whilst minimising costs across the industry. We are seeking to create a digitally inclusive environment for customers which offers them safe, secure, convenient and immediate payments. An opportunity exists to deliver additional value for customers by leveraging the power of the digital transaction and its data to offer new add-on services and improve the customer experience.
In 2019, spontaneous consumer payments total volume 29,996 million
- Enabler 1. More Customer Choice
- Enabler 2. Enhancing Consumer Protections
- Enabler 3. Building Digital Financial Inclusion and Confidence
Enabler 1. More Customer Choice
The financial services industry is committed to ensuring a choice of payment options for its customers. Customers should be able to understand their options, their value and any impact on them. Cash must remain free and widely accessible for those personal customers that continue to need it. To encourage wider access to different payment options, particularly new and existing digital payments, the industry plans to continue to promote their benefits and values. The ambition is that by widening access to digital payments to as many people as possible, they may benefit from improved financial outcomes.
Enabler 2. Enhancing Consumer Protections
By 2030, through regulatory collaboration, industry cooperation and increased scrutiny and research of the market, industry will be able to provide greater clarity, confidence and consistency in consumer protection. Consumer protections must keep in step with the evolving payments landscape.
Enabler 3. Building Digital Financial Inclusion and Confidence
Everyone, who wants to, should be able to access and use digital payments and benefit from them. Increasing customer confidence is a priority. Digital payments maximise choice, reliability and security for customers, as well as enhancing efficiency and innovation for the industry.
Delivering Further Innovation
Providing certainty on the identity of the payer and the payee is a key part of our vision for digital payments. The payments industry recognises that a collaborative approach with government, regulators and others to facilitate development of a new digital identity and authentication capability will deliver the optimum outcome for UK customers. A consistent approach might make solutions ubiquitous, removing friction and improving the customer experience across multiple services and channels far beyond payments. Improved digital identity and authentication would make digital payments safer for customers, help prevent economic crime and build trust.
The industry has invested £1.5 billion into the world leading Open Banking ecosystem since its conception.
- Enabler 4. Developing a Digital Identity Use Case
- Enabler 5. Tackling Economic Crime
- Enabler 6. Ensuring Liquidity Optimisation
Enabler 4. Developing a Digital Identity Use Case
We foresee tangible benefits through the enablement of a Digital Identity ecosystem that provides appropriate identification and authentication for different use cases. A consistent approach could deliver better outcomes for customers reducing unnecessary transaction friction and improving security. It could also support interoperability at scale across the competitive market.
A collaborative approach would be beneficial, enabling stakeholders, customers and the industry to work closely with government and regulators to facilitate development. Making it easier and more certain for providers to verify payment users and for users to authenticate each other will allow greater access to financial services and build trust.
Enabler 5. Tackling Economic Crime
The industry seeks to foster a thriving and competitive ecosystem which delivers increased prevention and detection of economic crime whilst building trust across financial services. Achieving this will require ongoing collaboration and specifically access to data shared by the entire sector and beyond. The industry’s interaction with the public sector will need to ensure any data sharing is appropriate and that funds linked to criminal activity are not lost from the system and, ultimately, from an innocent customer. It is also essential to consider how other industry sectors can help support a reduction in economic crime, noting the interconnected nature of payments across all aspects of the UK economy.
Enabler 6. Ensuring Liquidity Optimisation
Liquidity acts as a vital enabler within the payment ecosystem – making liquidity optimisation a key part of our vision. Current liquidity arrangements for cross border, domestic wholesale and retail payment market infrastructures could be optimised by enhanced systems, processes and regulation. We recommend that central banks, regulators, infrastructure providers and the industry undertake further work to consider how to improve liquidity optimisation in payment systems and liquidity risk management for the benefit of global and domestic economies.
Supporting Competition
Payment market infrastructures lie at the heart of any change and they are the key enablers to realise our vision, particularly to support competition and innovation of digital payments. The payment infrastructures in 2030 should support a vibrant and competitive ecosystem whilst being developed on a business model that is economically sustainable over the longer term. Reliability and resilience must be maintained but it should offer a smart, instant, cost-effective, scalable and frictionless payment experience for end users.
The cards network is the largest payments network in the UK, fulfilling 24,778 million payments in 2019, a figure that far exceeds the 9,271 million payments made over CHAPS, Faster Payments, Bacs and cheque clearing combined.
- Enabler 7. Aligning Payments Standards
- Enabler 8. Ensuring an Accessible and Competitive Infrastructure
- Enabler 9. Effective Regulation
Enabler 7. Aligning Payments Standards
Payments standards are an underlying enabler of interoperability, innovation and competition. If underpinned by strong governance to ensure they retain future effectiveness, they can promote best practice, increase scalability and facilitate end user choice. The industry’s adoption of ISO 20022 and common API standards should lower barriers to entry and promote competition. It is essential to consider this adoption from a market wide perspective and the potential alignment with different payment methods and types. While domestic payments standards are important, the UK payments industry should aim to implement and use global standards wherever possible and only diverge where absolutely necessary. Should divergence be required, the industry needs to ensure that this is managed transparently and effectively, to avoid introducing unnecessary friction and cost to payments.
Enabler 8. Ensuring an Accessible and Competitive Infrastructure
The payments industry is fast-moving driven by constant advances in technology. Payments innovation looks set to continue across the board with the prospect of new payment types and digital currencies. To support competition, innovation and customer choice the payment market infrastructure will need to continue to evolve, offering increased interoperability whilst being developed on a business model that provides economic sustainability over the longer term. The challenge is to successfully support a wide range of payment providers so they can offer great services to their customers whilst maintaining critical security, resilience and delivering efficiencies. Similarly, it is of utmost importance that both industry and the government ensure the continued alignment with the functional equivalence criteria of the European Payments Council (EPC) to support the UK’s continued participation in SEPA, whilst this remains in the UK payments industry’s interests.
Enabler 9. Effective Regulation
The payments industry has three main regulators (the Bank of England, the Financial Conduct Authority and the Payment System Regulator) and several other public bodies able to intervene; including HMT, the Financial Ombudsman Service (FOS), the Competition & Markets Authority (CMA) and the Information Commissioner’s Office (ICO). We recognise the good work of these bodies in their efforts to increase co-ordination, but greater understanding and clarity of roles is needed to address the considerable overlap between these authorities’ responsibilities to support better outcomes for the industry and its customers.
Next Step
The industry starts from a position of strength: several of the 24 recommendations identified in Future Ready Payments are already underway. However, there remains much work to be done, and UK Finance will now need to take action; engaging with regulators, the wider industry and other key stakeholders to gain advocacy and agree next steps.
If we succeed, the impact on every customer is likely to be subtle yet profound. Customers should enjoy more choice, more convenience and they will notice they get better information about each payment - perhaps itemised into groups in a user-friendly way. Payments may well seem easier to make and trust, with the use of a consistent digital identification process and even better consumer protections.
The UK is already home to many payments innovators, exemplified by our thriving Fintech sector and the potential afforded by open banking: we want to capitalise on the opportunities they afford and further consolidate the UK’s leading position on the world stage.
[1] UK Payment Markets Report https://www.ukfinance.org.uk/policy-and-guidance/reports-publications/uk-payment-markets-2020
[2] Open Banking - Future State https://www.ukfinance.org.uk/news-and-insight/blogs/open-banking-future-state
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