UK National Payments Vision: Key takeaways

Competing themes creating conflicts in need of resolution?

The National Payments Vision (NPV) sets out a number of plans that the UK Government has for the payments sector. These are grounded in a set of principles, chief amongst which is growth based on the pillars of innovation, competition and security. However, in seeking to promote these three themes simultaneously, tensions are revealed even at the high level of the NPV.

There are two areas in particular where the NPV indicates potential conflicts between the principles. The first concerns the conflict that exists between innovation and security. One of the key focuses of the Vision is on improving fraud prevention, which may be at odds with the intention to reduce frictions caused by anti-fraud requirements such as Strong Customer Authentication (SCA). The NPV suggests that the way to reconcile this apparent conflict is through the use of digital identities, which will be both secure and convenient for consumers.

The second area of conflict arises in relation to the need for a sustainable commercial model for Open Banking. Developing this model is described as "critical" to the development of Open Banking, thereby making it critical to the long-term plan set out in the NPV. However, the government simultaneously commits to "protecting existing fintech business models", having noted that many of these rely on free access to data. Resolving this conflict is postponed, with the government committing to "engage further with the ecosystem on these issues".

Now is the time for industry engagement

In light of the above as well as the other issues raised by the NPV, payments sector stakeholders would be well advised to take advantage of this excellent opportunity to participate in the government’s planned further engagement with industry.

The Vision Engagement Group (VEG) (see further below) will establish an ongoing formal mechanism through which private sector actors can contribute to the development of payments policy. Industry members of the VEG will be chosen on a rotating basis and membership is determined through open application, so interested parties should consider whether this is something they wish to participate in.

In addition, the broad range of issues considered in the NPV is likely to present a large number of other opportunities for input (Discussion Papers, Calls for Evidence etc). These may provide a more appropriate engagement channel for some industry players.

Background and overview

On 14 November 2024, HM Treasury published the NPV, setting out the government's priorities for the payments sector. The intention of the NPV is to provide a framework that promotes innovation and competition within payments, leading to greater levels of investment and, ultimately, growth in both the payments sector and the UK economy as a whole. 

The NPV was a key part of the Chancellor's Mansion House Speech (see our analysis here). It has been published in response to the 2023 Future of Payments Review (the Garner Review – see our related article here), which found that the UK has an historically strong payments sector, but currently lacks a strategic direction which is leading to a confused and overburdening regulatory regime. As such, having a central strategy for the payments sector and better coordination between regulators are core aspects of the NPV.

HM Treasury makes it clear that the NPV is a high-level "vision" intended to set out the strategic direction of the payments sector and the more concrete "plan" is to be developed later. To lay out this vision, the NPV is split into three parts. The two main sections concern short-term plans with the intention of "strengthening the foundations of today", and longer-term strategies as part of "building for tomorrow". The vision concludes with a short section laying out some steps the government will take to implement the vision.

To strengthen the foundations of today, the government focusses on short-term priorities of (i) reducing regulatory congestion, and (ii) improving payments infrastructure. To build for tomorrow, the government sets out the longer term aims of (iii) fostering the development of Open Banking, and (iv) improving protections against fraud. The NPV should help steer existing activities, particularly those which contribute to diversifying the payments ecosystem, harnessing next-generation tech and maintaining trust in payments.  

What are the key takeaways?

The government makes its overarching intentions clear in paragraph 1.1 of the NPV, stating: "Growth is the government's central mission". The payments sector is of importance here both as a source of growth and as an enabler to grow the wider economy. The government acknowledges that achieving this growth requires the public sector to create circumstances under which private sector payments actors will flourish. 

1. Reducing regulatory congestion

   The NPV states that the UK needs a regulatory framework that is "clear, predictable and proportionate". Central to this is improving coordination between regulators and having regulators consider their impact on growth and investment in the payments sector more carefully. With this in mind, the government has also published a joint remit letter to the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) with recommendations to: 

   1. review the regulatory overlaps between the FCA and the PSR to address coordination issues with clear demarcation of responsibilities; 
   2. make the FCA the UK's regulator for Open Banking, taking over from Open Banking Limited;
   3. work together (such as through data sharing initiatives) to ensure high standards of consumer safety and protection, including reducing levels of fraud; and
   4. work together on a flexible approach for delivering the UK's retail payments infrastructure. 

   In the joint remit letter, the Chancellor states the government's commitment to "co-design" policy development, referring to an intention to engage regulators, industry, consumer groups and other stakeholders. This approach applies to the development of payments policy and to the development of economic policy more widely, including to the development of "a financial services growth and competitiveness strategy" over the next ten years. The development of payments policy will form part of this broader strategy, further necessitating a joined-up approach from the regulators. 

   Additionally, the Bank of England, Prudential Regulation Authority (PRA), FCA and PSR have committed to revise their existing Memorandum of Understanding (MoU) by Q2 of 2025. This should contribute to a more efficient and joined-up approach to regulation, reducing the duplication of information requests made to firms. 

   A key aim is to help reduce the regulatory burden and provide clarity for regulated firms. However, the government has stopped short of introducing the numeric target recommended by the Garner Report, which proposed aiming to reduce the number of regulatory initiatives on firms by 10% in 2024.

2. Improving payments infrastructure

   The NPV's second short-term aim is to ensure that the UK payments sector has a payments infrastructure that is set up to be "resilient and support innovation". It is vital for stimulating growth and innovation that consumers and businesses have trust in the payments infrastructure. This requires it to be both reliable – meaning that payments reach their intended recipients quickly and without issue – and safe – meaning that there are effective systems to mitigate the risk of bad actors. 

   An improved payments infrastructure is viewed as necessary to take advantage of the next generation of technology, but the NPV is light on proposals for what this will look like. The requirements and design of the new infrastructure are left to the newly established Payments Vision Delivery Committee (further detail under ‘Next steps’ below).

3. Fostering the development of Open Banking

   One of the main recommendations in the Garner Report was to "unlock Open Banking". Open Banking features heavily in the NPV, which notes that developing Open Banking as a "ubiquitous" payment method would promote innovation and competition in the payments space, lead to economic growth, and provide better consumer outcomes by increasing the range of payment options available. Within Open Banking, the NPV identifies two areas of significance – accessing account data, and account-to-account payments – with enabling account-to-account payments described as a " strategic short to medium term priority".

   Central to the government's plans for Open Banking is the need to establish a sustainable "commercial model". As part of this, the NPV acknowledges that there is currently a lack of economic incentives for data holders to support the development of Open Banking. Additionally, there are concerns that the growth of Open Banking is likely to lead to significant additional use of application programming interfaces (APIs), which must currently be provided for free under the Retail Banking Market Investigation Order 2017. The government will consider whether policy changes are needed to support a sustainable commercial model, such as reasonable compensation for access. However, the NPV also notes that the government is committed to protecting the existing business models of fintechs and recognises the benefits of free access for democratising data and promoting innovation, so will look to strike a balance between these competing interests. 

   The NPV also comments on the need for Open Banking to be safe and adequately protect consumers, including giving them appropriate recourse where necessary. Currently, card payments offer greater consumer protections than bank transfers, which disincentivises consumers from switching to Open Banking. The Garner Review recommended addressing this "protection gap" in Open Banking. A solution will be delivered through the future framework and, in the meantime, the government welcomes work by Open Banking Limited to set up a dispute resolution process.

   As part of facilitating Open Banking, the government expresses support for digital identifiers as a way of enabling person-to-person payments. Digital identifiers remove the potential for errors when inputting sort codes and account numbers to make transactions. Previous UK Governments have already been taken in this direction, with the establishment of the "UK digital identity and attributes trust framework". The framework sets standards for reliable and secure digital identity services and currently has 45 certified providers of digital checks such as right to rent and right to work. Therefore, whilst digital identity has yet to be employed in the UK in a payments context, the groundwork for implementing it has already started. Legislative action in this direction is planned in the Data (Use and Access) Bill, which proposes to establish a statutory footing for digital verification services.

   Alongside initiatives to promote Open Banking, the government has committed to continuing with the design phase of the Digital Pound; however, the NPV expressly states that this is not a commitment to implement a central bank digital currency in the UK. For more on what the NPV means for digital assets and tokenization, take a look at this article.

   There is also an acknowledgement that certain groups cannot or will not use digital payments, and these consumers need to be catered for to avoid financial exclusion. As part of this, shortly before the publication of the NPV the House of Commons Treasury Committee launched an inquiry into potential rules to govern the acceptance of physical cash in the UK.

4. Improving protections against fraud

   Alongside making the regulatory environment in the UK more conducive to the growth of the payments sector, the NPV emphasises the importance of reducing fraud. Fraud directly harms those affected, and indirectly harms the payments ecosystem as a whole by undermining trust. Implementing more effective fraud protection is connected to the NPV's goal of reducing regulatory congestion, as monitoring and tackling fraud is currently an area of regulator overlap.

   The NPV sets out that the government's focus will be on preventing fraud. Action has recently been taken through the Payment Services (Amendment) Regulations 2024, which allows payment service providers (PSPs) to delay crediting the payee's account by up to 72 hours where the PSP establishes reasonable grounds for suspicion that the payment instruction has been made as a result of fraud or dishonesty. The NPV notes that further action is needed, particularly in relation to cross-sector sharing of information. APP fraud victims are often identified using online platforms and contacted using communications networks. As such, in addition to payments firms, the technology and telecommunication industries must play a role in preventing fraud. This has begun to be reflected in regulation, with the Online Safety Act 2023 imposing significant fines for large tech companies which fail to prevent fraudulent content from appearing on their platforms. Following on from this, the government has written to the technology and telecommunications sectors to call for demonstrable action to reduce the scale of incidents and losses from fraud taking place on their platforms and networks. The government will request updates on progress and action taken at the next Joint Fraud Taskforce in March 2025.

   Concerning the recently implemented APP fraud reimbursement rules, the government welcomes the PSR's commitment to undertake an independent review 12 months after implementation. 

   Whilst reducing fraud is of paramount importance, the NPV also recognises that, where possible, the frictions caused by more rigorous anti-fraud requirements should be mitigated. In this regard, whilst the NPV recognises that the implementation of SCA has reduced fraud, its rigidity has had negative effects on some businesses. To alleviate this, the government has agreed to adopt the Garner Review recommendation of replacing the prescriptive requirements with regulatory rules by committing to revoke the SCA regulations in the Payment Services Regulations 2017 and allow the FCA to incorporate them into its rules. This will enable a more flexible, outcomes-based approach to SCA. The adoption of digital identifiers has the potential to further reduce the frictions of anti-fraud measures, whilst simultaneously improving consumer security by making identity theft much more difficult.

Next steps for regulation

The Payments Vision Delivery Committee

To deliver on the NPV, the government has committed to establishing the Payments Vision Delivery Committee (PVDC), which will be chaired by HM Treasury and bring together senior members of the Bank of England (BoE), FCA and PSR to facilitate regulator coordination. The PVDC has two key deliverables:

1. To produce proposals relating to the UK's retail payments infrastructure needs, required governance, and funding models; and
2. To publish a plan of future initiatives designed to streamline regulator activity and provide clarity around payments regulations.

Within these deliverables, the PVDC will task the BoE and the PSR with (i) providing clarity on the upgrades required for the Faster Payments System (FPS), (ii) assessing future requirements of the UK's retail payments infrastructure, and (iii) determining governance arrangement to deliver this, including reforming Pay.UK. The BoE and the PSR are expected to engage stakeholders and set out an approach no later than the end of Q2 2025. After 9-12 months, the government will assess the future of the PVDC. 

A further point to note on infrastructure is that in its response to the NPV, Pay.UK explains that it has cancelled the New Payments Architecture (NPA) procurement because its technology strategy will deliver a future-proof payments platform as an alternative technology strategy to the NPA for delivering infrastructure renewal.

To assist the PVDC, the Vision Engagement Group will also be established. This will be comprised of standing members from HM Treasury and the regulators, as well as rotating members from the private sector. Private engagement will be determined by an open application process, which seeks to draw on the range of payments stakeholders in the UK.

The Open Banking Framework

To facilitate the development of Open Banking, in the NPV the government has committed to delivering a "sustainable long-term regulatory framework". This will make use of the smart data powers proposed in the Data (Use and Access) Bill. 

Whilst the framework is being developed, the NPV directs regulators to lay the groundwork. The NPV gives its support to the Joint Regulatory Oversight Committee (JROC) - made up of the FCA and the PSR in collaboration with industry players - development of a "phase 1 pilot" for Variable Recurring Payments, focussing on a limited number of low risk services (e.g. paying bills). However, the NPV states that the JROC will be wound up and its work will become part of the PVDC and VEG's remit. The winding up will take place "at the earliest opportunity", but no further indication of the timing is given. The government has also said that it wants the FCA to determine the sustainable commercial model in parallel with the delivery of the phase 1 pilot, although no timeframe is given for either. Work in this area has been slow thus far due to uncertainty over the direction of Open Banking, so the government's commitments in the NPV should help speed up developments. 

Next steps for industry

In the NPV, the government commits to further engagement with industry. The VEG will establish an ongoing formal mechanism through which private-sector actors can contribute to the development of payments policy. As the industry members of the VEG will be chosen on a rotating basis and membership is determined through open application, interested parties should consider whether this is something they want to participate in. 

In addition to the VEG, the broad range of issues considered in the NPV is likely to present a large number of opportunities for input (Discussion Papers, Calls for Evidence etc). These will also provide channels for industry players to engage through. 

We will continue to report on any significant developments in this space, including any significant opportunities for private-sector involvement in future policy development, so keep an eye on ‘Our thinking’ on hoganlovells.com.

Click here to download the NPV.

If you would like to discuss any aspect of the NPV, or Open Banking or payment services more generally, please get in touch with one of the people listed above or your usual Hogan Lovells contact.

Authored by Dan Park.