Natalie Timan, our Head of Strategy and Intelligence, talks about our horizon scanning work - why this is important, what we can expect for the future of payments and what our next steps are.
Close your eyes and think about payments. What do you see? A piggy bank rattling with coins; somebody using their phone to pay for their morning caffeine fix; maybe an excited young couple buying their first home.
Now, imagine a future of payments. Maybe people are still using pounds and pennies – or maybe those pounds are digital, rather than circular disks of metal. Perhaps even the need for phones has disappeared and all that’s needed is a fingerprint that tells the newsagent you’re good for the money and then moves the required amount from your bank account to theirs. That house the young couple were buying? The estate agent – making use of the potential open banking and the protections it brings – was able to arrange and transfer all of the money to the seller quickly and safely.
Maybe the property they bought existed solely in a virtual realm.
Most importantly, it's a future where everyone can access the payment services that meet their needs.
This would be a future where there is effective competition between different payment systems and those systems are efficient and commercially sustainable. One where there are sufficient protections in place for everyone using payment systems and one where everyone wants to do the right thing (supported by incentives for all players being in the right place).
It’s one that is in keeping with our vision for payments. On this, our Strategy is clear – and we have already made significant progress against it to safeguard the future of payments, keep people safe, and deliver effective competition.
In addition, our Annual Plan sets out our projects to help achieve the outcomes we are seeking in our Strategy.
However, the world is changing around us and we need to understand what is happening in payments and beyond, and the impact this could have on both our current work and the new projects that we take on. Or to put that another way, payment now and payments in the future.
By knowing what might be, we’re better placed to understand the potential challenges, discuss solutions and make sure there are limited barriers to innovation.
And that’s why we’re doing work to make sure we’re well placed to understand those developments and act on them if we need to.
In this blog I’d like to tell you a bit more about that to set the scene.
But because we think this is a topic that lends itself to listening, discussing and learning, we’ll be publishing more blogs and think-pieces too. And as we publish those, on our website and via our social channels, we’d love to hear from you.
Do you agree? Do you disagree? What have we missed?
Horizon scanning is vital to achieving our ambition
In just the last few years, we’ve seen a lot of changes in payments. As consumers, the way we make payments has changed. We have moved towards making more digital payments and away from cash. For some of us, our phones are replacing our purses and wallets.
Behind the scenes, the technologies supporting payments are developing at an extraordinary pace, with the growth in API based access, for example, and the emergence of distributed ledger as a mainstream payment technology.
Where and how we make payments has changed too and in areas like digital wallets, digital currencies and programmable payments, we are expecting to see even more change. There is a credible future where virtual environments become a significant place to make payments.
For merchants, the way they take payments is also changing. You increasingly see card payment terminals allowing market stalls and sole traders to take card payments.
We have also seen this change online. There are more – and more convenient – ways to accepted card payments online. And there’s still plenty of opportunity to provide enhanced competition and choice for merchants – benefitting all of us as consumers – including through our work unlocking account-to-account payments.
Just these examples show that, specifically in the areas of payment services, there has been a lot of innovation. This makes it easier for us all as consumers and easier for businesses. Where there could be more innovation is in the systems themselves – where issues such as infrastructure renewal, standards and coordination become particularly important.
It’s why our role as regulator can be essential. We can use regulation to address these challenges, and to support innovation and competition in payments. To drive those other, wider changes in how we make and receive payments.
What does that mean we can expect?
Our work in driving account-to-account transactions as a new, reliable way of making retail purchases. We’re seeing more people making payments using open banking and we’re expecting that usage to continue to grow. And the improvements being made through the NPA will enable more innovation, access, choice and hopefully competition.
And there are new technologies out there as well, that all have the potential to push the boundaries of what we understand payments should look and feel like.
These opportunities aren’t limited to what we might think of as the traditional payments ecosystem – think Web 3.0 and where AI may lead which could affect where or how we make payments.
We’re also watching how others outside of payments might move into the space.
And then there are those organisations which are already moving into the payments space whose influence here could grow – think Apple or Google, and we are watching developments here closely.
These all present exciting opportunities. But while there are opportunities, we can expect risks too. It’s why we’re watching developments carefully. So even though we’ve already made significant progress against our Strategy, we’re not resting on our laurels.
We want there to be a thriving, competitive payments ecosystem that is delivering systems, products and services that meet a need. By keeping an eye on the future, it means we can be ready to adapt, where we can, any regulatory approaches to support a dynamic, competitive and innovative market.
Our work in this space is key because by knowing what might be, we can identify and work with all stakeholders to understand the potential challenges and make sure there are no barriers to innovation, or at least reduce them as much as possible.
So… what next?
Close your eyes again.
Do you picture the same bright future for payments as we do? Do you share our view that horizon scanning is vital to achieving this ambition? If so, we want your help.
We are looking to engage fully with our stakeholders to understand your views of the horizon. What are the trends you are seeing? How are they affecting your work, the industry and the payments eco-system?
This is the first of a series of blogs considering different aspects of payments now and payments in the future.
We also plan to run roundtable sessions with our stakeholders to explore further themes and issues – some picked up in these blogs, and some perhaps prompted by our discussions.
Keep an eye on our website for more blogs and to see how you can get involved.