What is the new National Payment Vision, and what do merchants and payment professionals need to know?
- Nic Verdino
- Dec 12, 2024
- 6 min read
Updated: Jan 10
The National Payment Vision is a large government work, released in November 2024, that establishes the UK’s position in the global payment eco-system and sets out how the government believes the UK Payment Industry should develop.
The Vision is a response to the findings from the independent Future of Payments Review 2023, which stated that the UK could slip behind if changes were not made. This review provided recommendations on the steps needed to deliver world-leading payments in the UK successfully.
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The Government’s new Payment Vision is:
"A trusted, world-leading payments ecosystem delivered on next-generation technology, where consumers and businesses have a choice of payment methods to meet their needs."
Pleasingly, many of Taylr’s ideas and standards mirror those provided in the report.
So, what does this report actually mean? What is the payment vision focusing on, and what are the big statements?
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1. The UK needs to enhance its efficiency and drive more innovation
The UK needs to modernise its payment infrastructure (e.g. upgrades to Faster Payments) to improve transaction speed, reliability, and scalability.
Innovation in Open Banking and account-to-account payments will foster new services and reduce reliance on traditional, costlier payment methods like cards.
Providers can leverage next-generation technologies like AI and DLT, driving efficiency and enabling creative solutions for consumers and businesses.
2. The UK needs to improve competition
The government wants to increase competition in the payment processing sector.
This focus on competition is believed to ensure a more dynamic payments ecosystem, benefiting providers, merchants, and consumers.
By broadening payment options, including Open Banking payments and potential digital pound solutions, businesses will have greater choice and reduce dependency on dominant card networks.
3. The UK needs to lower payment costs
The Government wants to help reduce the cost of payment services, which will benefit Merchants by allowing cheaper payment processing. The report establishes a key driver for this as the acceleration of account-to-account payments, which theoretically should have fewer intermediaries and lower fees.
4. Stronger consumer protections are needed
Fraud continues to grow. By emphasising fraud prevention and enabling secure digital identities, the Vision endeavours to build trust in digital payments and safeguards for both consumers and businesses, preventing financial loss.
Robust protections (e.g. dispute resolution processes for Open Banking) will encourage wider adoption of emerging payment methods.
5. The economy needs to be future-proofed
Investment in next-generation payment systems will position the UK as a global leader in fintech innovation, ensuring its competitiveness in an increasingly digital global economy.
The exploration of the digital pound demonstrates foresight, ensuring the UK can adapt to the shift toward digital currencies and maintain sovereignty over its financial systems.
6. Innovation and growth require a reduced regulatory burden
The Vision states that the UK needs to streamline regulation without damaging the protections it provides to consumers and businesses. One suggestion is to improve coordination between bodies like the FCA and PSR. These organisations currently have a level of overlap that can be reduced, reducing compliance costs and business complexity.
A predictable, proportionate regulatory environment incentivises innovation and investment in the payments sector.
7. Increased resilience
Modern infrastructure will ensure the payment ecosystem can withstand technological and security challenges.
By integrating standards like ISO 20022, the UK can achieve greater interoperability for domestic and cross-border payments, reducing risks and costs.
8. Inclusivity
The Vision establishes that the public should not be excluded by how they want to pay. It states that continued access to cash is essential while expanding digital payment options, preventing financial exclusion and ensuring everyone can participate in the economy.
Digital identity initiatives reduce errors and barriers to payment participation.
9. Payments are, and will continue to be, a driver of Economic Growth
The payments sector is a key enabler of broader economic activity. By enhancing payments infrastructure and services, the Vision supports the UK’s mission of driving economic growth, boosting GDP, and creating jobs.
So, why does the UK Government’s Payment Vision matter?
In its introduction, the Vision states that the UK used to be a global leader in Payments; however, it is now falling behind.
This is partly due to the lack of a central strategy for how the UK should accept and process payments. Without a central vision, the UK market will become increasingly fragmented and exclusionary based on how people want to pay.
The Vision introduces this central strategy. It provides a platform to create a balanced, innovative, competitive, and secure payment ecosystem that works for everyone—from consumers and merchants to technology providers and financial institutions. It ensures the UK is prepared for the digital economy of tomorrow while enhancing trust and inclusivity today.
The Payments Vision sets out the UK Government’s roadmap for a safe, world-leading payments ecosystem where consumers and businesses can use trusted and secure technology to choose from their preferred payment methods.
As a long-time leader in the global payments landscape, it’s vital that the UK maintains a strong position in the face of ever-evolving technology and doesn’t risk falling behind international peers.
The report addresses key issues across the landscape and outlines three pillars to guide future activity
innovation
competition
Security
These pillars will drive the roadmaps of companies across the UK industry and will set the standard that companies should be measured by
Obviously, delivery is key. So, how will the government deliver on its vision for payments?
Underpinned by its three pillars of innovation, competition, and security, the government has outlined two foundational structures to help drive the Payment Vision.
The foundational structures for the Payment Vision are:
Building a good Regulatory framework
According to the paper, government regulators such as the FCA and the PSR are critical in implementing the government’s vision and ensuring compliance.
However, they must deliver a regulatory framework for payments, which is:
clear
predictable
proportionate
To deliver the above, the government has determined that the regulators must coordinate better to support each other’s activities and manage their collective impact on regulated entities without increasing regulatory burdens.
To do this, the government is setting up the Payment Vision Delivery Committee, which will guide the regulators and take input from a wide range of organisations. A specific focus is on providing additional consumer protection for account-to-account payments.
A resilient infrastructure
Enhancements to the Faster Payments System will improve infrastructure resilience and functionality. Focusing on account-to-account payments and expanding Open Banking will reduce reliance on cards and lower merchant costs, improving consumer choice and enabling seamless account-to-account payments. Merchants could benefit from reduced fees and innovative services through direct account transfers.
The report significantly focuses on fraud, emphasising upstream prevention and intelligence sharing. Technology providers must invest in advanced anti-fraud solutions, including tools for detecting and preventing authorised push payment (APP) fraud. There will also be a greater emphasis on avoiding payment fraud and enabling secure transactions across the industry.
This means merchants will have access to new tools and initiatives to tackle fraud and unauthorised transactions.
Give me the TLDR of the Government's Payment Vision:
There is a lot to unpack here.
However, in summary, the government believes the payment industry has to change. There is too much reliance in the UK on the likes of Mastercard and Visa, A2A payments have not taken off as anticipated, and there is not enough competition.
A personal opinion is that very little of what has been written is new or unknown to the payment industry.
It is fantastic that the government is finally taking consumer protection and fraud seriously. However, one may find it ironic that the card schemes already take these topics extremely seriously, and it was the government-backed open banking initiatives that provided very poor experiences over the last few years.
I also wonder if the ambition of reducing regulation is best served by essentially putting a regulator on top of the regulators to ensure they are working together. In theory, the Payment Vision Delivery Committee sounds like a good idea, but only time will tell…
Payment providers will need to embrace technological adaptability to align with The Payment Vision and the infrastructure upgrades and regulatory changes, as well as focus on the innovation that it projects. Anti-fraud solutions, already required, will need to be enhanced further to drive consumer confidence and market adoption.
This could be the beginning of an exciting time for the industry. If the vision comes true, then Merchants should prepare for increased payment options, improved infrastructure, (hopefully) reduced regulatory complexity, growth in innovation, reduced costs, and enhanced security. In addition, Consumers will receive more ways to pay that suit their own behaviours and needs while being protected from bad actors and fraud.
It’s ambitious, as any vision should be. We are looking forward to hearing more of the ‘how.’
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