The Payments Association Invites Incoming Chancellor to Show Leadership, Unlock the Potential of UK Payments as an Enabler of Growth, and Effectively Combat Fraud

On the day that the United Kingdom heads to the polls to vote in the General Election, The Payments Association, which celebrates innovation and collaboration across the industry, has drafted a letter to the UK’s new Chancellor of the Exchequer. The letter will be delivered following today’s election, when the position has been filled, and will highlight the payments community’s priorities for the sector.

An ambitious vision and strategy for payments

The UK’s payments industry has been without a Government-supported vision for some years. To fix this HM Treasury announced its intention to publish a National Payments Vision and Strategy in the Summer of 2024. This would inform the upgrading of the UK’s payment system to the most modern, world-leading standards. We recommend the publication of an ambitious, whole-ecosystem National Payments Vision and Strategy supported by the Chancellor to make the UK’s payments infrastructure competitive and an enabler of growth.

Open banking investment

Fintech is the future of financial services and, by delivering the next phase of open banking and open finance, we can unlock the potential for increased competition in retail payments.

With Open Banking and Open Finance technology presenting a significant opportunity to the UK, the association has urged the new Chancellor to advance the delivery of the open banking and open finance agenda to take advantage of its full potential. Open banking has already created 4,800 jobs in the UK, building a sector worth £4.1bn, with 10% of UK making use of these services.

The UK’s potential as a crypto hub

The association calls on the Chancellor to ensure the UK becomes a world leader in digital finance by helping the UK payments industry fully embrace the digital world and create a flourishing, innovative digital currencies ecosystem. The chancellor should ensure the UK fintech industry interoperates globally, attracts inwards investments, delivers high-skilled jobs and capitalises on the opportunity of delivering growth for the new digital economy.

To achieve this, the government and the FinTech sector need to work closely to adopt legislative measures that facilitate the creation of a proper digital asset ecosystem that provides seamless transactions, secure storage, efficient governance, widespread acceptance and interoperability, embracing web3, DeFi and smart contract standards to corroborate use cases that can be quickly adopted and proven in real world situations.

This might involve creating a UK crypto hub, learning from the EU’s MiCA and other similar legislations around the world. The Payments Association remains supportive of continuing to work closely with the Bank of England, the FCA and HM Treasury to ensure the UK can quickly adopt a Class A regulatory framework for stablecoins that can become a global point of reference for any jurisdiction that wants to operate in this domain. Many of its members also advocate for the development and quick adoption of a digital pound, following the progress being made by the Bank of England.

Better regulation on APP fraud

The association calls for ‘big tech’ including social media giants to be required to act, specifically via a ‘Tech Levy’ to pay for the impact that is caused by social media’s facilitation of payment fraud on the basis of the ‘polluter pays’ principle. The letter follows recommendations by the Home Affairs Committee that strongly urge the Government to consider introducing a fraud levy on social media companies, the funds of which can be used to compensate victims of fraud.

The association is also advocating for good regulation that will encourage responsible risk-taking and deliver sustainable growth. The Payments Systems Regulator’s (PSR) proposed changes to the Authorised Push Payment fraud rules go against this aim, the association believes. While The Payments Association has never contested the principle of reimbursement, it has also called for changes to the regulation as currently set.

Principally, the association has made the case for a reduction in the threshold to £30,000 from £415,000. With the average scam costing £11,000 for businesses and less than £2,000 for members of the public, a recommended mandatory reimbursement threshold of £30,000 would be almost three times the average scam for businesses and 15x the average scam for consumers. The association is not against the £415,000 cap but it urges the Chancellor to ensure that scam claims above £30,000, which account for less than 5% of total cases, must have a full review over a sensible period of time, proper police reporting, and being investigated in full rather than reimbursed on a mandatory basis.

The association anticipates that the unintended consequences of maintaining the higher mandatory limit will be irreparable damage to the UK’s fintech industry, diminishing the contribution the industry provides to the nation. The PSR’s policy rules as presently constructed will serve to undermine competition, stifle innovation and reduce investment, and it will force smaller players to make a disorderly exit from the UK. All of this will induce greater levels of de-banking, predominately among vulnerable and underbanked consumers.

The association has also called for the appointment of a dedicated Anti-Fraud minister who would coordinate cross-departmental activities to ensure all parties bear some responsibility for the evolving threat of fraud.

“We see the Chancellor’s appointment as an opportunity to maximise the potential of the payments sector while refocusing on its greatest threats”, said Tony Craddock, Director General of The Payments Association. “It is essential that the new government and the payments industry work collaboratively to protect the UK’s global leadership position. A clear vision and strategy from the new Government will generate significant investment and promote the UK’s position as the global payments leader solidified and see sustained growth in every UK region.”

He added: “We especially hope the Chancellor sees the benefits of lowering the threshold for mandatory reimbursement of an APP fraud claim and potentially introduce a dedicated Anti-Fraud Minster. The current landscape is all too easy for fraudsters to navigate and the PSR’s proposed changes to will only serve to exacerbate the situation. Swift action as proposed in our letter is necessary to mitigate the potential threats once the changes are introduced on October 7th.”

The letter will be delivered following the UK’s General Election, upon which time a new Chancellor will be appointed, and will be published at a later date.