National Payment Vision summary

On 14^th November 2024 the UK government published its long-awaited National Payments Vision (NPV). A year after Joe Garner’s Future of Payments review, which called for more leadership and direction from government, and following much dialogue with industry players of all types, the government has published a clear vision that recognises the importance of payments to the UK economy and the need to change the status quo.

The government’s vision is for the UK to have:

“A trusted, world-leading payments ecosystem delivered on next generation technology, where consumers and businesses have a choice of payment methods to meet their needs”

To achieve this, the ecosystem must be underpinned by strong foundations:

• A clear regulatory framework
• Resilient infrastructure 

Building from this, three pillars should guide activity across the ecosystem:

• Innovation
• Competition
• Security

The NPV then sets out clear actions needed to achieve the above ambition. These are broad ranging, demonstrating the wide impact of payments in the UK and the complexity of the payments ecosystem. The NPV acknowledges what hasn’t gone well in the UK and where things need to change, calling out a need for clearer direction from government and a less complex regulatory framework. The key areas covered by the NPV are set out below.

The government has communicated to the FCA and Prudential Regulation Committee (PRC) of the Bank of England its priority to promote growth and international competitiveness . It has done the same with a first of its kind payments remit letter jointly to the FCA and PSR, providing recommendations relating to the government’s priorities for the UK’s payments sector, in line with the NPV.

The key priorities highlighted in the payments remit letter are: 

• Enhancing coordination to address congestion in the regulatory landscape.
• Supporting the development of Open Banking - the government has appointed the FCA as the UK’s regulator for Open Banking.
• Ensuring high standards of consumer protection.
• Driving an agile and flexible approach to delivering the UK’s retail payments infrastructure needs.

In the NPV the government recognises the need for significant investment in the UK’s retail payments infrastructure to ensure it is resilient and better enables innovation and competition. It calls out the need for more agility and flexibility in the approach to delivering the UK’s infrastructure, taking into account the latest innovation developments, which include distributed ledger technology and the opportunity for domestic and international interoperability via ISO20022.

The government will establish the Payments Vision Delivery Committee to implement the NPV, and this Committee will task the Bank of England and the PSR to look at what the UK’s retail infrastructure needs. This work will be quite broad ranging: 

• Looking to the immediate, providing greater clarity on the upgrades required to the UK’s Faster Payments System – this will enable important changes that bring innovation and further resilience.
• Looking a little further ahead, assessing future requirements for the UK’s retail payments infrastructure.
• In parallel, determining the governance arrangements needed to deliver the above, including proposals to reform Pay.UK, drawing on international comparisons appropriately.

The government has given the Bank of England and PSR a deadline of no later than end Q2 2025 to engage stakeholders and set out an approach, signifying it wants to keep momentum going.

The NPV also confirms continued work on the design phase for a retail Central Bank Digital Currency. Referring to the Digital Pound in the NPV confirms the importance of considering the potential impact of this new technology on the payments ecosystem. The government confirms no decision has been taken to launch a CBDC, however the Bank of England is continuing work in this space mainly because so much work is being done on emerging technologies in other countries around the world.

In the NPV, the government states its ambition is for the UK to be a world leader in Open Finance. A number of areas are called out where the government will support to enable Open Banking to succeed:

• Delivering a sustainable regulatory framework via incoming smart data powers in the Data (Use and Access) Bill, currently progressing through Parliament.
• Prioritising account-to-account payments for e-commerce as a use case with higher value and easier to implement than in-person payments.
• Enabling customers and businesses to leverage their data to access personalised, tailored services and finance.
• An industry-led approach to the development of a commercial model, which it expects to be delivered quickly.
• Ensuring consumer protection is delivered for Open Banking payments.

Demonstrating the breadth of areas payments covers in the UK, the NPV also touches on the importance of work in the digital identity space to boost trust. The NPV points to the Data (Use and Access) Bill, which is currently progressing through Parliament. This Bill includes measures to establish a statutory footing for digital verification services without going as far as creating a mandatory digital ID system. This leaves the door open for private enterprise to develop solutions that meet consumer and business needs, which are supported by the right regulatory framework.

Continuing the theme of tackling important topics in payments, the NPV covers the government's plans to reduce fraud. It recognises ongoing growth of fraud and re-confirms its commitment of a new fraud strategy. It also seeks to simplify and clarify the regulatory landscape through the work of the FCA to manage existing overlaps between the FCA and PSR’s functions on fraud. In addition, government agrees with the recommendation in the Future of Payments review to remove the prescriptive requirements of Strong Customer Authentication (SCA) in the relevant technical standards and instead place them in regulatory rules and/or guidance. It will, therefore, start the process of revoking the payments authentication regulations relating to SCA in the Payment Services Regulations 2017 and instead incorporate this into the FCA’s rules, allowing for more agile and outcomes-based rulemaking. This important steps gives the industry more flexibility to develop fraud prevention solutions.

The NPV also confirms the PSR will commission an independent post implementation review of its APP Fraud reimbursement policy after 12 months of the policy being in force; and welcomes forthcoming work between the regulators and sector exploring different intelligence sharing solutions available and the barriers to their wider adoption. 

The industry has for some time called out the fact that fraud will almost always be initiated on platforms outside of the bank, yet the banks are held accountable for it. The government agrees with this point of view and has now written to the technology and telecommunications sectors to call for demonstrable action to reduce the scale of incidents and losses from fraud taking place on their platforms and networks.

The industry has been calling not only for a national vison but also for government to lead on delivering it. The government has responded by committing to establish the Payments Vision Delivery Committee. It will be comprised of senior representatives of the Bank of England, FCA and PSR. HM Treasury will chair the Committee to ensure decisions are aligned with the government’s vision. The Committee will run for an initial period of 9-12 months, after which its future role will be assessed. Its key outputs will be to:

• Outline proposals on the UK’s retail payments infrastructure needs and the governance and funding arrangements required to deliver this, led by the Bank of England and PSR.
• Publish a sequenced plan of future initiatives (the Payments Forward Plan), outlining decisions to streamline activity and provide clarity on regulatory requirements in the future landscape.

The Payments Vision Delivery Committee will be supported by the Vision Engagement Group. The group will comprise public and private membership, ensuring a collaborative approach to progressing work for the Committee’s decision.

In summary, the NPV provides much needed clarity and strategic direction for the UK payments industry. The UK has been a world leader in payments innovation over the last 20 years, and the new ambitions and delivery structures set out in the NPV will provide the foundation to continue this legacy.

To understand how the National Payments Vision will impact you, get in touch with KPMG’s Payments Consulting practice.