Challenges to innovation
At the PSR, we work hard to promote the development of, and innovation in, payment systems, but that doesn’t of course mean that we support new things at all costs, or just for the sake of it. We want to make sure that new ideas bring benefits to everyone that uses payments. New systems and solutions aren’t necessarily neutral: all of us in payments in the UK need to work together to ensure good outcomes.
With this in mind, we’ve been thinking about some of the things that we want to keep an eye on as we’re waiting for the future to arrive. These take the form of a number of open questions that we welcome your input on. Are we considering the right aspects? Are there any examples from across the globe we can learn from? Answering these and other questions together with you will help us decide where our focus should lie and what we should aim to achieve next:
We’ve been working over the last five years to make sure that access to payments and payment systems isn’t entirely in the hands of a small group of organisations. As new systems and platforms develop, we need to guard against the risk that we just replace the old incumbents and challengers with a new set of incumbents and challengers. It’s also important that, as new platforms and central systems arrive, we maintain our progress in making payments open to as many providers as possible. Do you think there are areas where this progress is threatened?
We’re also thinking about how people and businesses keep the ability to make and receive payments. Is being able to pay a right, like the right to free speech? Should it be protected like one? Or is the contract between provider and customer the right place for the conditions of access to payments to be defined?
Sometimes it’s said that the decline in the use of cash may lead to better outcomes because it will be more difficult to make illicit payments that rely upon anonymity. Perhaps, though, you and I don’t want our names tied to every payment we make, and not because we’re running a tax evasion scam!
The Universal Payments Interface – India’s immediate payment system – is tied to Aardhaar, the country’s digital identity scheme. Following implementation of these two systems there have seemingly been big benefits for financial inclusion; though there are concerns about data gathering and the privacy of data. Most countries seeking to implement digital payments see great benefits in the information they can gather from such payments. Would the idea of tying payments to a digital identity be welcomed in the UK? Or is who we pay and how much we pay them too sensitive to allow payments to be irrevocably tied to a permanent identity?
New business models: payments charges
Unlike in some other countries, in the UK – though there are exceptions – consumers don’t normally pay fees when making payments. As new business models emerge, will this hold? Will we need to be ready to protect free-to-use payments or are there some circumstances in which transaction charges are fair? Might some models allow access to payment services in exchange for permission to access consumer data? Might consumers have to satisfy other conditions to be able to make payments, and which types of conditions might be unreasonable?
Accessibility and inclusion
Innovation may bring many possibilities to make life better for those currently excluded from the financial mainstream, but we already know as the use of cash declines that there are challenges to ensure that the whole of society has access to our economy. Is there a risk that some types of payment will only become accessible to those who own the right type of technology? Does that matter as long as people have their preferred method of making payments?
Sometimes people talk about digital inclusion as a problem that particularly affects the elderly, but there’s some evidence that in the UK older people are beginning to take to – for example – online purchasing. If we are to make sure that everyone is brought along as the payments sector creates new and exciting things, might we have to change our thinking about who is excluded and who is vulnerable?
Innovation in the UK, global innovation
We all want the UK to continue to set the pace for payments innovation, but of course sometimes ideas are formed elsewhere and find their way here. At the PSR we’ve required that the new generation of the UK’s consumer payment systems will use international messaging standards. The Bank of England has done the same for the new generation of the Real Time Gross Settlement system. Are there innovative examples from abroad that could potentially also benefit businesses and consumers in the UK?
We want the UK to always be among the first countries to bring new ideas to payments. But we also think that it benefits the people and businesses of the UK if money can flow easily across borders. Can we set the pace for innovation and also ensure that our systems work well with those of other countries?
Let us know your thoughts
These are some of the things we’ve been thinking about, but perhaps you think there are bigger challenges out there that we haven’t mentioned?