The UK payments industry highly values the work of the European Payments Council (EPC) and its members ensured the UK retained its membership of the Single Euro Payments Area (SEPA), which minimised payment disruption for millions of people and companies across Europe following Brexit.
After decades of close collaboration and innovation between the UK and the EU on payments regulation the UK’s payment landscape is, and will continue to be, strongly interlinked with the European landscape.
The UK payments industry continues to look to Europe to deliver on key initiatives such as the Retail Payments Strategy and Open Finance proposals.
UK Finance represents the collective voice for the banking and finance industry. UK Finance is involved in promoting a safe, transparent and innovative banking and finance industry.
First, more general question: what have been the main changes in the UK’s payments landscape since Brexit?
Several regulatory changes have dominated the payments landscape in the UK in recent months. We are currently in the midst of an Open Banking revolution, driven by the requirements of the second Payments Services Directive (PSD).
The continued development of the New Payments Architecture (NPA), and the renewal of the Bank of England’s Real Time Gross Settlement (RTGS) service are also set to drive a step change in infrastructure through the implementation of ISO 20022, among other benefits.
The Bank of England’s work on potential options for a national Central Bank Digital Currency (CBDC) is also progressing and international innovation continues to pick up pace, with the launch of services such as SWIFT’s (Society for Worldwide Interbank Financial Telecommunication) GPI (Global Payments Innovation Initiative); the ongoing migration of international payment networks to ISO 20022 and the G20’s Roadmap on enhancing cross-border payments.
Like the majority of countries across the globe, the UK payments agenda has also had to adapt to the Covid-19 pandemic, which has accelerated the use of digital technologies, and dramatically impacted the use of cash and highlighted the importance of work to enhance digital payment inclusion.
Were payments impacted by Brexit? If so, how? Did you notice any differences, after Brexit, in the use of the payment schemes?
The impact of Brexit on SEPA payments has been varied across the market. The majority of SEPA payments have remained unaffected by Brexit and continue to be treated as they were pre-Brexit. However, a number of unexpected market developments have appeared since 1 January 2021.
These can be broken down into four key themes:
- Increased charges for SEPA transactions
- Deduction from principal amount
- IBAN discrimination
- Creditor ID discrimination
Whilst we recognise that these are not universal practices, they do have a potentially destabilising effect on the market, through increasing friction for consumers, and potentially impacting the legitimacy of the SEPA schemes which were created to enable cost-effective, fast and convenient euro payments for customers throughout the entire SEPA geographical zone, of which the UK remains a part.
What has been the impact of Brexit, if any, on key initiatives such as Open Banking? Did the UK’s regulatory agenda change after Brexit?
Naturally post-Brexit, the UK Government needed to rethink its relationship with Europe. There are two key pieces of work from HM Treasury which looked to address this:
- The Future Regulatory Framework Review: which considered how the regulatory framework for financial services can adapt, in particular to reflect the UK’s new position outside of the EU.
- The Payments Landscape Review: the first stage in a longer-term review by government of the payments landscape in the UK. Industry continues to engage closely with government to ensure that a truly innovative and collaborative payments landscape can develop domestically.
As noted, Open Banking has also set the scene for future change with the UK solidifying itself as a world leader here. Whilst the direct impact of Brexit on Open Banking may take some time to crystallise, the strides the UK has made in Open Banking may allow for a blueprint for others to use globally.
Perhaps the most pertinent regulatory change since Brexit is the UK government’s decision to increase the single transaction contactless payment threshold from £45 to £100.
How do you see the UK’s payment landscape developing over the next five years?
In recent years, payments has hit the headlines in terms of being one of the most exciting, diverse and complex industries within financial services. Payments not only provides the foundations for the wider economy but continues to innovate and drive changes in technology and society. There is now a huge opportunity to set out a bold and coordinated strategy for the UK payments industry to succeed over the coming years.
UK Finance alongside PwC ( PricewaterhouseCoopers) recently published “Future Ready Payments 2030” which is a cross-industry thought leadership initiative convened with the purposes of defining a long-term vision for the UK.
Here we set out our vision for 2030, which is for customers to benefit from the most modern, resilient and safe payments systems in the world, enabling competition, innovation, choice and opportunity.
We will harness common standards, open technology and a payments industry with a culture of collaboration, a resilient and sustainable ecosystem that works well for everyone.