Ahead of the next Britain general election and before the UK’s political parties release their party manifestos in the Autumn, The Payments Association, which promotes innovation and collaboration across the payments industry, has released its own Payments Manifesto. The Payments Manifesto is independent of all political parties and has been democratically developed to provide policy suggestions for delegates attending the political party conferences this year.
In his 2023 Mansion House speech the Chancellor released The Future of Payments Review, stating how: ‘Payments are essential to the UK’s economy – to people, to businesses – and are a major source of the UK’s competitive growth, at the heart of a dynamic and changing financial services sector.’ The key to this growth is collaboration, and through collaboration The Payments Association has identified policies for those running the institutions upon which the smooth operation of UK payments depends. These include policy and law makers in the UK and more globally, the international card schemes and payment networks.
Launched at the PAY360 Awards in London last night, the most prestigious payments ceremony in the UK, attended by almost 1,000 of the most senior executives from across the payments value chain, The Payments Manifesto: Building a World Class Payments Industry – Together is aimed at the many UK companies running both regulated and unregulated services in the payments industry, as well as all public and private sector organizations and their customers who depend on the UK payments industry to pay and get paid, safely, securely and conveniently.
Upon the release of the Manifesto at the PAY360 awards in London on October 4th, Tony Craddock, Director General of The Payments Association, said: “Our aim is for the UK payments industry to lead the world in providing innovative solutions that satisfy consumer and business needs, as well as, through the economic contribution our industry makes to the UK, be a driver of social wellbeing and economic growth.”
He added: “This vital piece of work is our declaration to industry stakeholders that we’ll achieve this aim while also providing the UK’s political parties with policy suggestions for their own manifestos, ahead of the next general election.”
Tackling fraud and scams
The manifesto sets out three top pledges – the first of which is a commitment to tackling any weaknesses that enable criminals to commit fraud or other economic crime and launder the proceeds. Authorised Push Payment (APP) fraud scams, where payments are made between bank accounts, are a £485million issue for the industry to solve. The Payments Association calls for cross-industry data sharing (to include financial institutions (FI’s), Big Tech and merchants) to counter APP fraud, as well as calling for a review of the plans of near-guaranteed payouts to victims of fraud and a 50/50 liability split between the sending and /receiving institution.
Upon the release of the Manifesto at the PAY360 awards in London on October 4th, Tony Craddock, Director General of The Payments Association said, ‘With the receiving account not having any real sight of the transaction but still having to carry 50% of the reimbursement cost of most account to account scams, there is no commercial reason for some smaller issuers to stay in the UK, because a few claims against which they have no real ability to prevent could cost them catastrophic financial damage.’
Tony Craddock added: “The UK payments industry is an undeniable success story and has emerged as a cornerstone of economic growth and technological advancements. The UK remains at the forefront of progress. Unfortunately, this status is not guaranteed – it needs constant work to keep it there. I believe it is essential that we collaborate to build a solution to the problem of APP fraud, not simply plaster over a wound. Our members fear that if we don’t get this right, we will see businesses flee the UK in droves.”
An innovative approach to regulation and standards
The second key pledge of the manifesto is a commitment to the UK being known as the best place in the world to run a payments business, while striking the right balance between fostering innovation, encouraging competition and protecting consumers. As such, The Payments Manifesto sets out to:
- Encourage the Financial Conduct Authority (FCA) and Payments Systems Regulator (PSR) to employ a more measured, proportionate approach to regulating payments firms – one that is both agile and flexible in order to enable innovation and attract investment in the UK payments industry.
- Urge the government to hold the FCA to account for providing high standards and consistent supervision of Electronic Money Institutions (EMIs) and Payment Institutions (PIs).
- Urge the FCA to invest in the best staff and resources to provide a more effective authorization system for new EMI and PI licence applications and change of control requests, while creating an environment that is inclusive to both established and emerging players.
Tony Craddock said: “We want to help the UK to create world-leading regulation in payments managed by a dynamic, accountable and fair regulator that can balance business growth with consumer protection and best of breed standards.”
Encourage account-to-account payments in the UK
There are many countries around the world where payments are made securely and cost-effectively between bank accounts, and the UK was the first to enable this with Faster Payments almost two decades ago. However, recent changes to regulations and in the institutions behind account-to-account payments have stalled. The Manifesto recommends that to promote the adoption of account-to-account payments, the following policies are implemented:
- Support the current work being done by the Joint Regulatory Oversight Body (JROC) to create a competitive and sustainable open banking ecosystem that delivers alternative payment options for merchants.
- Support the development of equitable commercial models for the open banking ecosystem
- Develop a system for open banking payments that provides appropriate consumer protection and a dispute resolution service that protects all open banking stakeholders, supported by the appropriate economic model.
- Shape a new funding model and governance of Open Banking Ltd that enables innovation, competition and consumer benefit without being dominated by any party.
- Work with public sector organisations to access the cost savings and data enhancements derived from open banking as proven by HMRC.
Tony Craddock adds, “We’ve achieved a great deal with open banking already, so let’s not reinvent the wheel. Let’s build on this, leveraging the system’s ability to share data as well as make payments, so that people can pay and be paid through to sectors beyond banking such as utilities, travel, investment and hospitality’.
How the UK can lead the way as a digital currencies hub
With HM Treasury and Bank of England considering plans for a digital pound and digital currencies being a hot topic for 2023, The Payments Association pledges a commitment to bring the UK payments industry fully into the digital world, to create a flourishing, innovative digital currencies ecosystem that interoperates globally. The recommendations from the manifesto include making the UK a global hub for companies enabling the tokenisation of money and the application of distributed ledger technology (DLT).
It also advocates collaboration across institutions and global bodies to create and ensure the delivery of a clear and balanced regulatory framework that supports innovation and competition for digital currencies, protects end users, enables financial inclusion, and gives regulatory certainty to banks and PSPs, as well as creates international standards to ensure interoperability between traditional banking rails, card payments, stablecoins and CBDCs.
Tony Craddock commented: “Money has always evolved throughout time – it’s an unstoppable historical process. However, there are sceptics with strong views about the adoption of new technologies, particularly within digital currencies. Our duty as an industry is to fight against misinformation and scaremongering in this important area to give the UK the ability to lead the world.”
He added: “The manifesto sets out a clear vision for a globally interoperable digital currencies ecosystem to foster a future where we are all going to transact more digitally, making use of modern technology.”
The Payments Association has also proposed to run a three-month Sprint with the support of policy and lawmakers, that includes involving all main market players including other trade associations, regulators and government stakeholders, as well as users from retail and Big Tech companies. The aim of this Sprint Payments Alliance is to identify how a prioritisation mechanism could work and assess options on their feasibility, suitability, acceptability and cost-benefit.
The UK payments industry is at a tipping point. With a general election on the horizon, the industry is showing politicians what needs to be done to ensure the payments ecosystem continues to satisfy unmet consumer and business needs. The Payments Manifesto is the first step in reviewing this vital sector and providing a list of priorities upon which the political parties can act to support the UK’s world class payments industry.
Tony Craddock commented: “The UK payments sector up to now has been a tremendous British success story for many years that has contributed to the £1.8tn global industry as reported in the 2023 McKinsey Global Payments Report – we cannot fall behind now. However, we are in a pivotal position to remain at front by listening to advice from the two-thousand-strong payments association community of experts, leaders and activists.”
The Payments Association runs seven stakeholder Working Groups covering financial inclusion, regulation, financial crime, cross-border payments, open banking, digital currencies and ESG. The volunteers in these groups represent the collective views of the industry and work together to ensure the big problems facing the industry are addressed effectively.
For more information on the work and services of The Payments Association, visit https://thepaymentsassociation.org.