Celebration, better control, rival moves and buying a bus ticket with illegal tender

Issue 89 | 18 January 2021

Welcome to issue 89 of Payments:Unpacked, get to grips with the UK’s retail payments landscape with Mike Chambers - exclusive payment insights, hot topic briefings and fundamentals unpacked.

Don’t forget to share the newsletter with friends, family and via your social media network and please send me your feedback.

Share Payments:Unpacked

Open Banking: A cause for celebration

Open Banking Implementation Entity (OBIE) - a remarkable achievement and still only the beginning.

It has been three years since PSD2 marked the start of Open Banking, the UK has built a world-leading ecosystem.

The OBIE report that over the last three years:

  • 300 fintechs and innovative providers have joined the ecosystem

  • More than 2.5 million UK consumers and businesses now use open banking-enabled products to manage their finances, access credit and make payments.

  • Every month, hundreds of thousands of UK consumers and businesses become new active open banking users

  • API call volume has increased from 66.8 million in 2018 to nearly 6 billion in 2020.

Open banking used to be the best kept secret in financial services. We have worked hard to develop the open banking infrastructure and functionality over the past three years and our significant progress is reflected, not only in the millions of active users of open banking technology each month, but in the sustained momentum of growth we are seeing. We have developed a world-leading, thriving ecosystem of nearly 300 regulated providers, who collectively are bringing innovative new products and services to market.

Imran Gulamhuseinwala OBE, Implementation Trustee, The Open Banking Implementation Entity

Three years ago, we ordered banks to give people control of their own data to help transform the industry, driving innovation and stimulating rivalry. Today, more than two and a half million people are using open banking, with new customers coming on board every day. This is a remarkable achievement and still only the beginning for how far we can take this technology.

CMA spokesperson

Moving online for better control of your finances

Source: FSTech

Almost two-thirds (62 per cent) of UK citizens say they are in “better control” of their money now than before COVID, according to research.

Global software consultancy ThoughtWorks commissioned research among over 2,000 UK adults about how technology had changed their banking habits during the pandemic.

Almost one-in-three people (31 per cent) said they don’t use cash any more, and 22 per cent said they were now used to making more payments through apps and tech platforms rather than banks.

In addition, 18 per cent had used online tools to give their finances a “spring clean” by building up their savings and cutting back on non-essential spending.

A further 15 per cent said they had shopped around for better deals on financial products, cutting fees, charges and interest rates with brands that are not traditional banks.

The same amount of respondents said they had streamlined all their payments and banking online, saving time and money.

In addition, 39 per cent said they have stopped going to a high street bank branch, 28 per cent have stopped using cash machines and 24 per cent have stopped writing cheques altogether.

In place of this, 33 per cent said they had tried mobile banking for the first time and 36 per cent had opened up a PayPal account.

And 16 per cent had cashed a cheque through mobile banking, 14 per cent had opened an account with an internet bank and 13 per cent had used Apple Pay to buy goods.

Changes in consumer habits raise urgent questions for high street banks as technology and more agile customer interaction have moved consumers away from a reliance on the high street.

We believe banks still have a crucial role to play but the days of them just safeguarding cash and issuing cheque books are well and truly over.

Phil Hingley, director of financial services at ThoughtWorks UK

Banks come together to develop payment app to rival Revolut

Four Irish banks have come together to develop a new payment system that they hope will rival Revolut.

The move by AIB, Bank of Ireland, Permanent TSB and KBC Bank represents the first joint venture between the main banks here in more than 20 years.

The joint venture has had to be notified to the Competition and Consumer Protection Commission in case it infringes competition law.

They are coming together to build an an app-based instant payment system in a bid to stem the rapid loss of customers to digital disruptors such as Revolut and Apple Pay.

More: Banks come together to develop payment app to rival Revolut.

….and a UK banking licence

Revolut has applied for a UK banking licence, which would allow it to provide customers full service current accounts and products like overdrafts, loans and deposit accounts. 

A UK license would also mean customers had the security of protection of up to £85,000 under the Financial Services Compensation Scheme (FSCS), the UK’s lifeboat fund. 

We want to be the best in class for customer experience, value and capabilities, and offering full bank accounts allows us to do just that. 

“In the future, we want to offer many more innovative products to our UK customers and we are excited to continue driving innovation and competition in the banking industry

Revolut founder and CEO Nik Storonsky

More: Revolut UK banking licence.

Three ATM facts

Key ATM facts for week ending 10 January:

  • ATM transactions increased by 1.4 million (when compared to the previous week). 

  • ATM transactions were 19.0 million less than the equivalent week in 2020.

  • After some recovery during December, weekly ATM use has reduced by 46% (compared to the equivalent week at the beginning of 2020). 

More: Northey Point’s weekly ATM tracker.

Current Account Switching (CASS)

Next week the next tranche of CASS performance and bank winners and losers are due to be published. You can check out the Q3 2020 data at: CASS tracker - we’ll update our tracker with the Q4 data as soon as it is released.

A survey from Pay.UK found that the North East has the highest proportion of SMEs switching bank accounts:

And the West Midlands has the lowest:

More about the research from Pay.UK: SME Switchers.

Unpacking the payments landscape

Payments Landscape: Unpacked launches on the 23 February - all you need to know about payments in the UK in a series of informative briefings, subscribe for the whole series or pick and mix topics on a PAYG basis.

More: Payments Landscape:Unpacked.

Financially vulnerable could miss best deals and require more support to switch bank accounts

Latest Pay.UK research indicates that financially vulnerable consumers would benefit from more targeted information and support to overcome negative associations with switching (Frontier Economics research commissioned by the Current Account Switch Service).

The long-term impact of the COVID-19 pandemic could potentially lead to sustained higher levels of financial vulnerability for some time. It is vital those who could benefit from switching have access to information that allows them to fully understand the process. That is why we are committed to continue to raise awareness among this group.

Our research partnership with Frontier Economics has generated a number of findings for the switching ecosystem to consider. It suggests that the whole current account ecosystem has a role to play in ensuring people can switch if they want to, when they want to. The Current Account Switch Service is committed to collaborate with current account providers and consumer representatives to facilitate the work needed to review and refresh the switching service.

Maha El Dimachki, Chief Payments Officer of Pay.UK, owner and operator of the Current Account Switch Service.

More (including the full report): CASS Research.

This item originally featured in fortnightly update on developments at Pay.UK, PSR, BoE, HMT and Open Banking - part of our premium newsletter - subscribe: Payments:Unpacked Premium Edition.

In brief

Longer read

Two longer reads this week, both from David Birch:

1: Legal and illegal tender

I remember a story about a schoolboy who was refused access to a bus in Wales for trying to pay with a Scottish banknote. The bus company was pressured and apologised, saying that “Scottish currency is legal tender”. Actually, it isn’t. Scottish banknotes are not legal tender in England or, for that matter, Wales any more than Bitcoins or e-Yuan are. Only Bank of England banknotes are legal tender in England and Wales. But there are Sterling banknotes printed by banks in Scotland and in Northern Ireland that are not. Scottish banknotes are not legal tender anywhere, even in Scotland. In fact, Bank of England banknotes are not legal tender in Scotland either, because Scotland has a separate legal system to England and has no legal tender law at all.

David Birch

Read: Legal and illegal tender.

2: Blockchain pitches

Most Blockchain Pitches I Hear Make No Sense, Yet I’m Sure That Blockchain Will Transform Business

David Birch

Read how is it that even a blockchain grouch like David thinks that the technology has something to offer?

Read, subscribe and share

Getting to grips with the UK’s retail payments landscape can seem a complex and daunting task.

The Payments:Unpacked newsletter from Mike Chambers at Northey Point explores a wide range of the UK’s payment news including: Open Banking, Request to Pay, Direct Debit, Confirmation of Payee, Bacs, CHAPS, Faster Payments, LINK, cash, cards and cheques and unpacks the eco-system that supports the operation of these systemically important payment systems.

The newsletter is an independent and informed insight into the UK’s payments landscape – exclusive payment insights, hot topic briefings and fundamentals unpacked.

Join the rapidly growing number of subscribers and navigate the UK’s payments landscape with former Bacs CEO Mike Chambers.

Share Payments:Unpacked

Thanks

Mike