While the UK payments ecosystem is among the most dynamic globally, the UK Payments Strategy Forum is aiming to address key challenges within the existing system and introduce solutions that will enable consumer flexibility and enhanced security.
Last week, the UK Payments Strategy Forum unveiled A Payments Strategy for the 21st Century. In the context of new regulations such as PSD2 and the progress towards increased digitization, the strategy plans to implement “the most radical change since the 1960s” by addressing a broad set of reforms that will increase security while providing greater control to consumers in how they manage their regular finances.
At its core, the strategy recommends a simplified payments architecture through consolidation of the three payments system operators in the UK: Bacs, Cheque and Credit Clearing Company, and the Faster Payments Service. The new entity would be responsible for implementing the strategy and for facilitating the integration of new payment methods expected out of the fintech ecosystem in the coming years.
The risk of a payment being sent to the wrong account, either by accident or fraud, has been highlighted through consumer feedback in recent years. To tackle this, the strategy proposes that a confirmation of the recipient is sent to the payer before any funds are transferred from their account. Further control and flexibility is provided by a “request to pay” that would be sent by the payee – be it government agency, business, charity, or consumer – allowing the payer to decide how and when to approve the payment.
While the strategy is a legitimate response to the disruptive forces at play currently in the UK payments environment, its success will be determined by how well the Payments Strategy Forum identifies and mitigates risks that may hinder its adoption, whether customer-related or from within the industry. The forum claims it will bring end users on the journey by promoting the security of their personal data, as well as collaborating with industry participants including businesses and payment services providers.
Collaboration has been a popular word in 2016, but the industry in general has struggled to make good on it, with little innovation hitting product and service roadmaps to date despite a plethora of accelerators and incubators. Hopefully the Payments Strategy Forum will be more successful, and in the process will give a timely boost to the innovation engine in the UK.
By Nicolae Bacila, Consumer Payments Analyst