Building a National Vision and Strategy for Payments
Issue 585: 19 March 2024
Building a National Vision and Strategy for Payments
In this edition of Payments:Unpacked we focus on the Future of Payments Review’s key recommendation for a National Payments Vision and Strategy, HM Treasury’s response to this recommendation together with a look at other examples of national vision and strategy for payments published by other countries.
We also look at the UK’s first National Payments Plan - published by the Payments Council way back on 2008.
Future of Payments Review
Back in issue 548 (“The UK sprinted ahead but is starting to flag” - 22 November 2023) of Payments:Unpacked we covered the publication of Joe Garner’s highly anticipated Future of Payments Review.
In the Terms of Reference for the review Joe was tasked to consider how payments are likely to be made in the future and make recommendations on the steps needed to successfully deliver world leading retail payments, further boosting UK financial technology (‘fintech’) competitiveness.
At the epicentre of the review was a conclusion that:
The UK is in a good place today, but without a National Payments Vision and Strategy, we cannot be confident in the future.
The primary recommendation in the report was that the Government develops a national payments vision and strategy – particularly considering;
the criticality of payments to consumers and the economy,
the many billions of pounds being invested
the highly interdependent nature of the payments arena.
Read the report: Future of Payments Review.
Front and centre of the report was a primary recommendation:
The top recommendation in the report is that the Government develop a National Payments Vision and Strategy. Given that payments are essential to economic growth, constitute such a major part of the UK’s important infrastructure, the rate of technological change and the volume of in-flight activity, it is recommended that Government provide more central, highest level forward-looking direction to the category.
The report expanded on this recommendation as follows:
A vision for payments is vital to underpin a globally competitive economy. This vision should include high level guidance on the relative priorities, so that both regulators and industry can become more aligned in their delivery. Importantly, this should sit above the existing work with a key objective to simplify the current plans and landscape.
A National Vision and Strategy should define clear guiding principles such as safety, simplification, coordination of initiatives, responsiveness (to innovation), inclusivity (to build broad alignment on priorities) and accountability to drive progress.
We considered where the creation of such an overriding vision and strategy should be led from and concluded that only HM Treasury has the influence and oversight to provide leadership to the entire payments landscape. To be successful, HM Treasury needs to allocate an adequate level of resource to develop the blueprint and to ensure its delivery.
National Payments Vision
On the 8 March 2024 HM Treasury published an update on the National Payments Strategy and Vision recommendation outlined in the Future of Payments Review.
The Review’s key finding was that the UK’s payments landscape is congested and would benefit from a clear overall strategy. The government is committed to maintaining the UK’s reputation for a world-leading payments ecosystem, and so has accepted the recommendation to publish a National Payments Vision this year.
The objective of the National Payments Vision is to provide clarity on the government’s ambition for UK payments. It will seek to guide industry and regulatory activity through providing direction on the shared outcomes the government seeks to achieve to ensure a world-leading payments ecosystem. The Vision will serve as the government’s full response to the Future of Payments Review.
The National Payments Vision will build heavily on the extensive work and engagement undertaken by Joe Garner for the Future of Payments Review, including the public Call for Input. The government will undertake a comprehensive programme of engagement on key issues, and will work closely with key trade associations and membership bodies to gather views.
The government will publish the National Payments Vision as soon as possible later this year.
HM Treasury, March 2024
The top four takeaways from the HM Treasury statement are to address the reports recommendation for a National Vision and Strategy, HMT:
is not undertaking a wholesale consultation process.
is engaging with industry through trade associations and membership bodies to get the input of the industry.
has appointed Joe Garner to advise on its work
and
The National Payments Vision will be published this year and it will serve as the government’s full response to the Future of Payments Review.
Learning from other countries
The development of a National Payments Vision and Strategy is not unique to the UK - amongst others Australia, Ireland and the European Central Bank (ECB) are undertaking similar exercises.
European Central Bank (ECB)
Key findings from the 26 responses from the EU national payment committees:
Adoption
31% of member states have adopted a national retail payments strategy.
27% of member states are planning to adopt a national retail payments strategy.
23% of member states follow the Eurosystem’s retail payment strategy.
Key elements
Of those who have adopted a national retail payments strategy the top 7 key points are:
Increasing the use of instant payments
Promoting mobile payments
Work on CBDC
Implementing Request to Pay
Promoting financial inclusion
Facilitating the access to cash / acceptance of cash
Increasing card acceptance
At the bottom of the list were:
Decreasing the use of cheques
Work on stable coins.
These key points were refined bytes ECB to outline three main national payment strategy priorities:
When question who was overseeing the implementations of the actions in the strategy EU member states reported:
Source: ECB National payment committees: overview of functioning and strategies.
Ireland
On the 12 December 2023, Ireland’s Minister for Finance, Michael McGrath, launched a public consultation seeking stakeholder views on the National Payments Strategy for Ireland. This builds on a National Payments Plan originally published in 2013,
Launching the public consultation Mr McGrath said:
Ensuring Ireland has an accessible and innovative payment system is vital for our society and economy. All citizens should be able to participate fully in all aspects of modern life using digital or cash methods of payment. While technology can enable vulnerable groups partake in society in new ways, it should not exclude them. I want to ensure choice is at the centre of our future payments strategy.
As the trend towards digitalisation continues, we have to ensure that people are not left behind and we must avoid the risk of financial exclusion. We must recognise the important role that cash continues to play in our society and economy, and this is a role I am determined to protect. The public consultation exercise affords interested groups and members of the public to have their say on the future of our payments system, and I would like to hear as many voices as possible.
The Strategy will set out a roadmap for the future evolution of the entire payments system, taking account of developments in digital payments, cash usage and how future changes should be made to the legislative criteria relating to Access to Cash.
A key element of the work will be to examine and analyse fraud, which is a critical issue and something that was not considered at the time of the NPP ten years ago. While much of this area is governed by EU legislation, it is important that the NPS examines and analyses payment fraud to see if further domestic measures can be identified to prevent fraud. On a related matter, work on financial literacy is already underway within the department on this issue that was covered in a separate recommendation of the Retail Banking Review.
Within the payment roadmap, the NPS will also look at crypto-assets, instant payments, open banking, and what new data needs to be collected on the payments landscape.
On access to cash, it will consider the likely evolution of cash usage and how the criteria for reasonable access to cash that will be set out in the upcoming Access to Cash legislation should evolve as cash usage changes in the future. The legislation will calibrate the criteria to ensure that cash access will remain at about June 2023 levels, initially.
A related issue concerns the need to ensure that cash can be accepted as a means of payment where possible. It will, therefore, look at the acceptance of cash issue and consider, inter alia, if legislation should be introduced to require certain sectors or sub-sectors to accept or facilitate the acceptance of cash; and if it should be policy to require the public service to accept or facilitate the acceptance of cash.
Australia
Published in 2023 the Australian government’s strategic plan for its payment systems focusses on building a modern and resilient payments system
Australia’s vision for its payments system is:
A modern, world-class and efficient payments system that is safe, trusted and accessible, and enables greater competition, innovation and productivity across the economy.
And is supported by a set of principles to guide the future direction of the payments system:
Trustworthiness, Accessibility, Innovation, and Efficiency.
And focuses on the following key priorities and supporting initiatives:
1) Promoting a safe and resilient system
Reducing the prevalence of scams and fraud
Strengthening defences against cyber-attacks
Supervising systematically important payment systems
2) Updating the payments regulatory framework
Implementing changes to the Payment Systems (Regulation) Act (PSRA)
Establishing a new payments licensing framework
Promoting competition by facilitating transparent access to payment systems
Enabling greater collaboration between payment system regulators
Reducing small business transaction costs
3) Modernising payments infrastructure
Phasing out cheques
Upgrading systems
Maintaining access to cash
4) Uplifting competition, productivity and innovation across the economy
Aligning payments system objectives and the CDR framework
Supporting the broader use of Digital ID
Uplifting digital and technological skills
Building public trust and confidence and supporting adoption of AI
5) Australia as a leader in the global payments landscape
Creating a regulatory environment that attracts and enables innovation
Facilitating cross-border payments
Exploring the policy rationale for a CBDC in Australia
More:
(UK) Payments Council
A National Payments Vision and Strategy for the UK is not a new concept - back in May 2008 the now defunct Payments Council published a National Payments Plan.
The Payments Council’s plan was developed after extensive consultation with the industry and users, and was intended to be a strategic document in which the trade body set out a vision for UK payments together with the work they were doing to put the vision into practice.
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