Radical shake-up of UK payments announced
The Payments Strategy Forum – a panel of representatives from consumer groups, banks and businesses – has today announced the “most radical change” since the 1960s to the way UK payments are made.
With around 700 transactions made every second, totalling £75trn, the forum said that as banking evolves towards digital services, the existing systems present barriers for new providers and services which mean customers can’t benefit from the new technologies.
And with financial fraud on the rise (£775m was stolen from UK bank accounts last year), it said these issues need to be addressed “head-on”.
Its recommending a new way of making payments that gives more control and assurance for consumers over how they manage their finances, safer and more secure banking, and opportunities for new banks and fintech firms to compete in the industry.
Confirmation of Payee
This safeguard will help prevent financial fraud by allowing people to avoid sending payments to the wrong account, either by accident, or being tricked into doing so.
It will ensure a confirmation of the recipient is sent to the payer before any funds leave their account.
Request to Pay
This will allow customers to authorise a regular payment, such as a utility bill or gym membership, before the company withdraws the money from their account. The forum said this will be a huge boost to people on variable incomes who may struggle to settle their accounts at the same time each month.
Payment system operator merger
Lastly as part of the strategy, it recommends consolidating the governance of three payment system operators: Bacs, Cheque and Credit Clearing Company (C&CCC) and the Faster Payment Service (FPS) into a single entity.
The forum has set out a roadmap for the work to start immediately and Ruth Evans, chair of the Payments Strategy Forum, said: “Payments are the lifeblood of the UK’s economy. They underpin our daily lives, from the morning coffee we buy before work, receiving our salaries and pensions, sending cash-strapped kids loans for rent to avoid going into overdraft, to the purchase of our first home. It’s important that we have the tools to protect ourselves and that we future proof our systems for generations to come.”
Hannah Maundrell, editor in chief of money.co.uk, said these plans are the “shot in the arm” the banking industry needs to drag its tech up to a standard that can cope with the demands and threats its customers face.
“As soon as next year we should get extra information about where our online payments are going so it’s less likely you’ll send our cash to the wrong account or worse, into the hands of fraudsters,” she said.
“This is just the start, the ambitious reforms should make it far less likely you’ll be hit with hefty fees for missed payments, much easier for you to stay informed about where your cash is going, safer for you to bank online and simpler for you to change account. It’s rare you read an official paper that seems to ‘get’ all of the issues and addresses them sensibly. Simply put, these plans are brilliant news for everyone with a bank account.”
However, she said that banks will be challenged when it comes to data security, as seen with the recent Tesco Bank hack. “It’s vital the banking industry steps up to this challenge and protects its customers against the real and growing threat of fraud.”