Summary

On 14 November 2024, the UK Government announced its National Payments Vision, setting out its ambitions for the UK's payments sector to deliver world-leading payments and to support its growth mission.

In our view, the message is positive, the Government is leading the way in helping to foster closer collaboration between the payments industry and its regulators in order to help it achieve its objectives of promoting innovation, encouraging competition and protecting consumers.

But is the Vision enough to deliver what was hoped for – a clear strategy for building a "trusted world-leading payments ecosystem that can help deliver economic growth"? We have set out below where the strategy and next steps are clear and where more detail is still to come.

Key developments and their impact

Reimagining of the Payments Infrastructure

• The Government has carefully considered the role of the New Payments Architecture (NPA) programme, concluding that a more agile and flexible approach to delivering the UK's infrastructure needs is required to ensure the UK is primed to seize the opportunities of next generation technologies. Focus has therefore shifted from a comprehensive overhaul to a more pragmatic upgrade of the Faster Payments Scheme to help deliver and support innovation.
• A new Payments Vision Delivery Committee (PVDC), chaired by HMT, and comprising senior representatives of the Bank of England, FCA and PSR, has been tasked with setting out an approach for the upgrades needed to the Faster Payments Scheme, assessing future requirements for the UK's retail payments infrastructure, and determining the governance arrangements needed to deliver this including proposals to reform Pay.UK. The PVDC is expected to publish its plan by the end of 2025.

Reading between the lines, we think this opens the doors for industry to take the Regulated Liability Network (RLN) (or an alternative) to the next stages of exploration and implementation alongside existing payments infrastructure.

Strengthening coordination in the regulatory landscape

• The Government has issued remit letters jointly to the FCA and PSR, introducing a strategic steer on the Government's priorities for the payments sector and making clear that the regulators should have regard to the Government's defining mission of growth, while respecting each other's statutory objectives and calling for enhanced coordination between the FCA and PSR.
• The letters recognise that it is important for regulatory activity to promote innovation, competition and security within the payments landscape, and that establishing the PVDC will drive coordination of initiatives to address regulatory congestion.

We suspect these remit letters do not go far enough for some and Government from calling for greater scope to hold regulators to account for their acts or omissions. Therefore, we expect more discussion on this and the appropriate coordination between regulators over the next few years.

Open Banking

The Government has identified Open Banking as a priority initiative in providing customers and merchants with more choice in how they make and receive payments. The NPV sets out the priority areas for developing Open Banking in the short term:

• As anticipated by the Data (Use and Access) Bill, the Government has asked the FCA to be the regulator for Open Banking, marking a significant step towards a sustainable long-term regulatory framework for Open Banking.
• The need for sustainable commercial models to drive investment and innovation in this space. In relation to CVRPs, the FCA will take over from JROC after phase 1 has been delivered and will explore a commercial model for e-commerce use cases.
• Consumer protections in Open Banking payments will be addressed by the future regulatory framework.

Focus now needs to shift to the regulatory framework needed to make all of this happen. We anticipate a lot of action in this space during 2025.

Next generation technologies

• The consensus is that a more agile and flexible approach is required to fully realise the opportunities offered by next generation technologies, with digital tokenisation and CBDCs being explored further. The NPV does not add anything new to the discussion on a Central Bank Digital Currency, as no decision has been made on its implementation.
• As the Chair of UK Finance pointed out, we will be unlikely to realise the benefits of new forms of digital money without enabling the use of digital identity products. Therefore, we continue to await the passing of the Data (Use and Access) Bill to introduce measures to establish a statutory footing for digital verification services.   

Payment fraud

Protection against payment fraud is highlighted as a key issue in ensuring consumer protection and trust in the UK payments ecosystem and we should expect a continued focus on fraud prevention. The NPV specifically mentioned the following:

• Changes to Strong Customer Authentication requirements;
• An Independent review of APP fraud mandatory reimbursement rules; and
• A call for the prioritisation if intelligence sharing initiatives between firms.

It is not exactly a new revelation that the Government plans to remove the prescriptive strong customer authentication requirements under the Payment Services Regulations 2017, enabling the FCA to set new outcome focused rules. Many industry participants have been discussing these changes for some time.

However, a clear statement from Government that an "independent" review of the authorised push payment fraud reimbursement rules is set to take place 12 months after implementation should be welcomed by most.

Next steps

Understanding the direction of travel set by the Government is crucial for payments industry participants. Although we are awaiting the details of the Government's plans, firms should understand the proposals set out in the NPV and its impact on their business going forward.