This is the text of the speech as drafted and may differ from the delivered version. This speech was delivered at Sibos, London, 24 September 2019.
Thank you, Russell, for that introduction. Thank you for the invitation to speak here today, and for organising what promises to be an engaging overview of UK’s payments.
For those that don’t know me, I’m Chris Hemsley, and I’m the Managing Director of the Payment Systems Regulator.
The PSR is the UK’s independent regulator of payment systems, and – put simply – our role is to support innovation and improve competition in payments. But also to protect users of payment systems – including promoting a good choice of how to pay which meets the needs of different people. And, of course, payment systems that are resilient and reliable.
Innovation, competition and protecting people – themes I will be returning to.
This is a really exciting time to be involved in the world of payments. The speed of change in our sector is breakneck!
Here in the UK, digital payments are growing fast. According to the 2018 World Payments Report, the UK is one of the top 10 non-cash payment markets in the world. At the PSR we are acutely conscious that we regulate a sector that processed more than 90 trillion pounds worth of transactions last year. This is big stuff!
And the rapid evolution of digital payments and markets, is transforming both our lives as consumers and how our economies work.
Personally, I am particularly excited to be speaking to you within a month of being confirmed as the new MD of the PSR. Today is a great opportunity to give you my perspective on some of the key challenges and opportunities in UK payments.
The PSR’s work in a wider context
Given the pace of change, there are many transformation themes I could speak about. For today I want to focus on two in particular – and they are two that are very important priorities for the PSR:
- First – how the rapid shift to digital payments interacts with the role of cash in our economy.
- And second – the fundamental redesign of the UK’s interbank payments architecture, so it is fit for purpose to meet the future needs of the UK’s digital economy.
Now, at this point I would like to put down a marker. I am going to talk to you about the PSR’s work in these areas – but these are major, economy-wide themes and we need to work closely with others to address them.
Indeed, you will shortly hear about the related work of the Bank of England and about the UK’s leading-edge approach to Open Banking. While Paul and Natalie will no doubt build on some of the things I am about to discuss.
Access to Cash
So, with the scene set, I would like to start with the topic of cash; and I know this can be an emotive one.
It may also seem a little odd that I am going to talk so much about cash at an event focused on digital payments. But, one part of realising the opportunities of digital payments – and our role in protecting people – is ensuring that everyone benefits and we do not leave anyone behind.
It will be no surprise to anyone here that the UK economy is moving to a place where cash plays a smaller role. What might be a surprise to some of you is the pace at which that change is happening.
This means we need to understand and address the impact this has on those who rely on cash.
As this is Sibos, I’m betting that most of you used digital payment methods to pay for your morning coffee or travel here today. From contactless to wearable technology – the convenience of these payment methods is ensuring rapid take-up.
The fact that cash use is in decline is not in question. Ten years ago, cash accounted for 60% of all payments. Today it is less than 30%, and in ten years forecasts suggest it will be below 10%.
This is a big shift.
Our approach at the PSR is based on our view that everyone should have a good choice of how to make payments in ways that work well for them.
And not everyone wants to or – indeed – can choose digital payments. Even for those who want to choose digital methods, for a number of reasons, we are not there yet.
To pick just one – Ofcom currently estimates that around 12% of adults in the UK suffer from ‘digital exclusion’, and our consumer research highlighted that 9% of survey respondents did not own a laptop, desktop, tablet or smartphone.
So digital payments do not yet meet everyone’s needs. This means cash still has an important role to play and our work needs to protect people who cannot or do not feel able to adopt digital payments.
Delivering on this requires more than just the PSR – which is why we very much welcomed the establishment of the Joint Authorities Cash Strategy Group – JACS for short – earlier this year. JACS brings together the PSR, the Financial Conduct Authority, the Bank of England and the Treasury to build on the existing collaboration across the regulators.
Under this umbrella group, the PSR is focusing on some key areas where we can help make a difference.
Protecting access to ATMs
The first of these is all about ATMs. While cash use has reduced, 80% of us still use it every week, and most of that cash (80% or so) gets into the hands of consumers from an ATM. And consumers that do want to access cash have told us that free-to-use ATMs are very much their preferred means to do so.
The immediate challenge here – as the decline in cash usage puts pressure on ATM providers – is protecting the geographic spread of free-to-use ATMs so consumers ca