In November last year the Government released its north star for UK payments in the form of the National Payments Vision. The NPV recognised the importance of developing high-quality payment rails and to move things forward the Government created the Payments Vision Delivery Committee.
The Government's latest package of financial regulatory measures, the Leeds Reforms, includes an update from the Payments Vision Delivery Committee. The Committee's paper sets out a new model which is intended to (i) deliver the next generation of UK retail payments infrastructure, and (ii) support short-term activity to enhance resilience and functionality of the existing Faster Payments System.
The update is important not only because it sets up a framework allowing for work on a new retail payments infrastructure to continue in a structured manner, but also because it demonstrates a commitment by the government, regulators and the industry to take steps to make the NPV more than just a vision.
What are the key takeaways from the update?
A new model will be set up to design and deliver the new payments infrastructure. This involves:
- The Payments Vision Delivery Committee which sets the strategy for retail payments infrastructure. The Committee will be made up of HM Treasury, the Bank of England, the FCA and the PSR.
- A Retail Payments Infrastructure Board chaired by the Bank of England and including representation from the payments industry. The Board will report to the Committee.
- A Delivery Company which is industry-owned and responsible for procuring and funding next-generation infrastructure. The Board will oversee the Delivery Committee.
- Pay.UK which will focus on the running of the existing interbank systems. Pay.UK will also contribute its expertise through representation on the Board and the Delivery Company.
The model recognises the importance of involving the industry and it bakes in public-private collaboration. It also represents more of an evolution (albeit an important one) then a revolution. The intention does not seem to be to dismantle all existing systems and frameworks in favour of emulating other international systems (like Brazil's Pix). Instead a balance is struck between maintaining current systems (with Pay.UK continuing to play a role) and leveraging existing UK expertise while setting up the framework for new infrastructure to be built.
What is not covered by the update?
In short, detail. The update says very little about funding and governance. These are two key aspects for any public-private endeavour as we have seen in the Open Banking space. The fact that the Delivery Company will be "industry-owned and led" and "responsible for procuring and funding next-generation infrastructure" suggests that we can expect the industry to foot a large proportion of the bill.
In terms of governance, while the update provides clarity on the overall structure of the model, the degree to which the Delivery Company has discretion to make decisions relating to funding and procurement is unclear. It is yet to be seen who has the final say on the new infrastructure.
What are the next steps?
- We can expect a strategy from the Committee for retail payments infrastructure in the autumn. The strategy will establish the key priorities for the new infrastructure.
- The first meeting of the Board is intended to take place in October.
- By the end of the year the Committee will publish the Payments Forward Plan which will set out a sequenced plan of initiatives across the payments ecosystem including initiatives in both retail and wholesale payments, and the role of digital assets.
- The Delivery Company will be launched under chair-designate Vim Maru (CEO, Barclays UK).