Open Banking's influence on the UK's payments

Thursday 23 November 2023 11:54 CET | News

The UK has commissioned a review of its payment sector which identified Open Banking as a method of improving the country’s consumer A2A payment journey.

The independent Future of Payment Review was commissioned in July 2023. It identified the need for consumer protection and dispute resolution systems through Open Banking, while also recommending it to enhance the UK consumer account-to-account (A2A) payment journey.  The review also underlined that Open Banking could provide a feasible digital alternative to card schemes, considering the prominent dissatisfaction with their cost among retailers and merchants and the expansion of digital wallets.

The UK has commissioned a review of its payment sector which identified Open Banking as a method of improving the country’s consumer A2A payment journey.

The review’s findings

The Future of Payments Review also focused on consumer protection and suggested that the HM Treasury, JROC, and industry participants prioritise addressing the need for a basic level of safety and clarity on the liability of payments made via Open Banking. Considering the rising popularity of Authorised Push Payments, they also created a disruption in consumer protection for purchases and scams, therefore requiring immediate attention. Officials suggested that this could be a basic dispute resolution service that manages purchase protection potentially to be shared at the industry level. The review also underlined that in Brazil, the Open Finance Structure of Governance established by industry associations can manage all dispute resolutions between Open Finance participants and that the Central Bank imposed liability onto third-party payment providers.

Furthermore, the review advised focusing on Open Banking as a method of enhancing the UK consumer A2A payment journey as the region lags when it comes to person-to-person payments completed by bank transfer. The UK was also referred to as holding a leading place in Open Banking, with currently 200 third-party providers registered and approved and the recent journey coming along with others globally. On the other hand, even if customer advocacy with the UK A2A process is currently 77% and falls in line with the global average, it does not reach Brazil’s 92%. The review also suggested improving the user experience so that the UK maintains its current position. The country also considers a digital identity scheme as in other countries that have a national identifier or digital ID, progress in the payment sector has been more accelerated.

Payments industry’s reaction to the review

According to UK Finance’s officials, the UK payments market development is reflected in the Future of Payment Review, however, the company agrees that the payment environment needs to be simplified and supports regulators in improving it. Representatives from stated that by implementing a wider use of Open Banking to increase competition and innovation, while also focusing on it as a primary solution for a viable digital alternative to card schemes, the recommendations could help the country obtain a leading position in retail payments globally.

Moreover, the Payment Systems Regulator (PSR) stated that the review provides support for elements of PSR’s strategy, including increasing competition through Open Banking and A2A payments. The regulator intends to continue its work on maximising benefits and solidifying the UK’s position in payments.

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Keywords: Open Banking, Open Banking payments, Open Finance, account-to-account payment, digital wallet
Categories: Banking & Fintech
Countries: United Kingdom
This article is part of category

Banking & Fintech