In this thought piece, Kate Fitzgerald, our Head of Policy, looks at how we are helping consumers make the most of digital payments.

As set out in our Strategy, we want to support a choice of payment options for users. This requires that we maintain an up-to-date understanding of how consumers and businesses are using payments, the issues they face and how these are evolving over time. This article sets out the findings of our latest research in this area and how the PSR is helping to support access. 

Digital payments are increasingly popular. Recent industry data1 shows the use of mobile and digital wallets increased from only 14% of UK adults to 47% between 2017 and 2022. As digital payment usage grows, we want to make sure consumers can make the most of them. Addressing consumers’ needs is central to the way we operate and a part of that is understanding the challenges and issues they face.    

In our regular survey of consumers’ use and perceptions of payments systems,2 90% said they were either very or fairly satisfied with the choice of payment types. However, satisfaction levels are lower among digitally inactive people (74% among those who do not regularly use online or mobile banking). They are also lower among financially excluded people (72% for those who do not have a contactless debit or credit card). As digital payment technologies continue to evolve, they could leave behind such groups of users, who may have different payment needs that are not currently being met.  

What we have found 

Data from the FCA’s Financial Lives Survey suggests that the size of these populations can be significant. An estimated 3.9 million people are digitally excluded3, 1.1 million are financially excluded/unbanked4 and an estimated 3.1 million are cash-reliant5. We are keen to understand the potential interactions between these three groups, so we can help support those who want to use digital payments more. 

The underlying FCA survey data shows that the overlaps between these groups are quite small. For example, nearly two-thirds of cash-reliant consumers are neither digitally nor financially excluded. This suggests that the majority of these people choose to use cash – instead of having to use it because digital payments are not available or do not work well for them. Digital or financial exclusion can also inhibit digital payment use so we are focusing on areas where we can use our powers to make the greatest impact.  

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To explore some of these issues in greater detail, we commissioned targeted qualitative consumer research on the barriers faced by cash-reliant or digitally excluded consumers in using digital payments.  

In addition to that, we will soon deliver quantitative research which explores the awareness of open banking among consumers and SMEs and aims to identify how it can help people, including those in vulnerable circumstances. 

The two research projects target different audiences and pose different questions. However, they identify some common themes and point towards three key barriers to increased use of digital payments: 

  • ability or willingness to access digital payments (often linked to a insufficient awareness of what different payment options have to offer) 

  • control of spending 

  • trust in digital services 

This work builds on the PSR Panel’s DPI report which noted the potential for account-to-account payments, based on open banking technologies, to enable innovation in new payment services that may encourage greater take-up of digital payments. 

What we are doing 

As the take-up of digital payments increases, we must consider the needs of people with limited digital and financial access and skills. These barriers (access, control and trust) are complex and multifaceted issues on which we can give relatively limited help. Nevertheless, we are committed to understanding and responding to these challenges to achieve good outcomes for users.  

The PSR is joint chair of the Joint Regulatory Oversight Committee (JROC). As such, we have driven forward industry work through the Strategic Working Group, and through working groups on new ways of paying, such as Variable Recurring Payments (VRP). The first phase of the development and roll-out of VRP focuses on utility bills, regulated financial services and payments to local and central government.  

Compared to existing payment methods, VRP can deliver important benefits to payers and billers. It will support increased access for consumers (and merchants) to payment methods that better meet their needs. Powered by open banking technologies, it will provide further control and flexibility to consumers on how and when they pay, supporting financial management. The research shows over 40% of consumers want greater control over their payments. Although overall awareness of open banking is still low, close to a third of consumers under 34 say they would be likely to use VRP services for payments such as utility or local government bill payments. 

We will work with industry to ensure that the right processes and safeguards are in place so people can trust their payments will be made. This includes enhancements to data collection and sharing processes, as well as the creation of a dispute resolution mechanism.  

In addition, our work on authorised push payment (APP) scams will give firms incentives to prevent fraud and build trust for consumers using digital payments. Mandatory reimbursement requirements coming into force on 7 October 2024 will increase protections and ensure consumers are treated fairly. These requirements will also ensure the victims of Faster Payments APP scams get their money back. As a result of this policy, firms are already taking steps to improve their fraud prevention measures. We will continue to monitor compliance with the policy and to formally evaluate its effectiveness. This will include assessing any increase in consumer trust and confidence.  

We’re increasing transparency by publishing data, promoting intelligence-sharing and expanding the roll-out of Confirmation of Payee. This is a name-checking service that provides essential protection for consumers in around 99% of bank transfers. It is a vital tool in reducing APP fraud and increasing consumer confidence.  

We will continue to update our understanding of the barriers to using digital payments and respond to challenges as they emerge, in support of our statutory objective to promote the interests of service users. 

1.FCA, Financial Lives 2022 Key findings from the FCA’s Financial Lives May 2022 survey.

2. Payment Systems Regulator Consumer Research February 2023.

3. FCA’s Financial Lives Survey defines as digitally excluded ‘those who never or very rarely use the internet, or those who use the internet occasionally (less than once a week), but rate their ability to use it as poor or bad’. 

4. FCA’s Financial Lives Survey defines as unbanked those people ‘who do not have a current account with a bank, building society, credit union or a money account institution’.

5. FCA’s Financial Lives Survey uses the term ‘heavy cash users’ to define consumers who ‘pay for everything or most things in cash’.

6. Please note that this Venn diagram contains rounded numbers.