How well do you know the UK's retail payments landscape?

Issue 70 | 23 November 2020

Welcome to issue 70 of Payments, Payments, Payments - get to grips with the UK’s retail payments landscape with former Bacs CEO, Mike Chambers - exclusive payment insights, hot topic briefings and fundamentals unpacked.

This week’s quote is attributed to Mahatma Gandhi:

“If you don't ask, you don't get it”

Mahatma Gandhi

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Payments Tracker

Last week we published our November round up of the UK’s retail payments - in this report we see how the first national lockdown followed by an increasing level of local lockdowns continued to impact the volume and value and of payments processed in the UK.

Read: November’s round up of the UK’s retail payments.

Thank you to all those who took part in our Twitter poll: “How well do you know the UK's retail payments landscape?”. Here’s the answers:

Q: How much volume growth has Faster Payments experienced over the last 12 months?

A: 16% (31% got the right answer).

Q: How much volume growth / loss has retail CHAPS payments experienced over the last 12 months?

A: -11%.

Q: What has happened to cheque volumes over the last 12 months?

A: -22% (51% got the right answer).

Q: Have Direct Debit volumes increased or decreased over the last 12 months?

A: Increased (78% got the right answer).

Q: What growth has Debit Card experienced over the last 12 months?

A: +2.5% (only 16% got the right answer).

Q: What has happened to ATM transactions over the last 12 months?

A: -43% (39% got the right answer).

Q: What is the proportion of Debit Card payment are made contactless?

A: 62% (38% got the right answer).

Thank you for taking part in the payments quiz - click here to see the poll results.

Each month we publish a round up of the volumes and values of the UK’s retail payments - this is November’s Faster Payments update:

Faster Payments

In the 12 months to the end of October 2020 we see that:

  • Single Immediate Payments have increased by 23% (12 months to September also 23%)

  • Total Faster Payment volumes have increased by 16% (12 months to September also 16%)

  • Total Faster Payment values have increased by 7% (12 months to September 7%)

October was again a strong volume month for Faster Payments as monthly volumes continue above pre-Covid levels despite the probable impact from local lockdowns – for example the total number of Faster Payments processed in October 2019 was 219,988,000 compared to 258,301,000 in October 2020.

Read: November’s round up of the UK’s retail payments.

Starling Bank moves to profit

Starling Bank announced that it was the first of the neobanks to breakeven in Europe.

With nearly 1.8 million accounts, £4 billion in deposits and £1.5 billion of lending, they announced that they hit break even in October and fully expect to be monthly profitable from here onwards on an operating profit basis.

Starling generated £9 million of revenue for the month of October 2020, which represents an annualised run rate of £108 million. This gave a positive operating profit of £0.8 million for the month of October 2020, or £10 million on an annualised basis.

More: Starling Bank Trading Update - October 2020.

Access to Cash: Call for Evidence

HM Treasury’s Access to Cash Call for Evidence closes on the 25 November. The Call for Evidence sets out the government’s aims for protecting access to cash throughout the UK.

It seeks views on: how the government can ensure the UK maintains an appropriate network of cash withdrawal and deposit-taking facilities over time through legislation, including the potential role of cashback; the factors affecting cash acceptance; and whether the government should give a single regulator overall statutory responsibility for maintaining access to cash.

The Access to Cash Review team have published a summary of their response to HM Treasury.

Their response highlights three key points:

  • Many retailers have to pay 3-4% for all transactions through their merchant, making the costs of cashback unsustainable.

  • Suggests that the Post Office's banking and cash services should be brought under the Financial Conduct Authority's (FCA) regulatory remit.

  • Agreement that the FCA should be appointed as regulator overseeing cash distribution but point out the Authority would need extra resources to take on the extra work.


Briefing: The Payments System Regulator

This week’s longer read is all about the Payment Systems Regulator.

The call for a regulator to oversee the payment systems industry began with a series of reviews, starting with the Cruikshank Report in 2000. This was followed by a number of subsequent government-led reviews, reports and consultations.

Following HM Treasury’s consultation Opening Up UK Payments in March 2013 the PSR was officially created under the Financial Services (Banking Reform) Act 2013.

In April 2014 the PSR started work, engaging with the payments systems industry. The PSR became fully operational a year later on 1 April 2015.

The purpose of the PSR in their own words:

Every time anyone uses a cash machine, transfers money, uses contactless, or gets paid, they use a payment system. Payment systems are always evolving and the PSR is here to make sure they work well for everyone.

In a fast-moving environment, we challenge the industry to adapt by supporting innovation and improving competition, so that the UK benefits from world-leading payment systems.

We encourage collaboration to help solve problems and, when we need to, we take difficult decisions and use our powers. We change our approach to get the best outcome for everyone

Grab a coffee and read: Briefing: The Payments System Regulator.

Current Account Switch Service

Pay.UK have just published the number of Current Account Switches that took place in October. The number of switches has recovered from the Lockdown 1.0 levels but remain significantly less than February or March this year.

More: Northey Point’s Current Account Switching tracker.

No queue at the ATM

This week we reported that it was unlikely that you’d find a queue at the ATM:

  • Week ending 15 November saw a new low in weekly ATM transactions at 26.8m – the lowest weekly volume of ATM transactions since early summer.

  • The value of ATM transactions on Saturday 14 November was down by 46% (compared to equivalent day in 2019).

  • Weekly ATM use has reduced by 43% (compared to equivalent week in 2019).

More: ATM Tracker.

In Brief

Emerging Payments Awards - This Thursday

It’s been a hard year for many, but it’s also been one filled with innovation which is something we should all celebrate. Join me for an afternoon of entertainment and a week’s networking at the virtual Emerging Payments Awards on the 26th of November.

It’s free to attend for anyone in the payments industry and all registrants are entered into a prize draw to win one of 100 £50 reward vouchers, courtesy of EPA partner Banking Circle.

Organised by the Emerging Payments Association, the EPAwards will be a fun afternoon with comedy host Sara Pascoe, an insightful industry fireside chat with Marion King, and maybe a few surprise celebrity cameos thrown in as well.

Networking with 1,500 attendees is at the forefront, with the 1:1 AI-enabled networking platform live for the whole week.

As an EPA Ambassador I hope to ‘see you’ there - register your place.

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

The Payments, Payments, Payments 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.