Payment firms welcome government focus on open banking and competition

Payment firms have welcomed Chancellor Jeremy Hunt’s plans to legislate on open banking next year and follow recommendations of a government-backed review calling for more competition in the market.

Former Nationwide boss Joe Garner’s Future of Payments review urged the government to help card payment firms challenge Visa and Mastercard as the UK’s “clunky” Faster Payments Service risks reducing the industry’s competitiveness.

His report, published alongside the Autumn Statement on Wednesday, also said open banking could speed up direct consumer-to-consumer transfers

The report called for a “digital alternative” to Visa and Mastercard that would give retailers the choice to take payments without a card network.

Visa and Mastercard were responsible for 99 per cent of UK card payments in 2021, according to the Payment Systems Regulator.

Spokespeople from Visa, Mastercard and PayUK have welcomed Garner’s review. The wider sector has also reacted positively.

Richard Newman, corporate affairs director at Open Banking, said: “The UK has been a pioneer in the use of open banking, with adoption reaching almost eight million active users, including almost a fifth of the UK’s SMEs.

“Today’s Autumn Statement demonstrates the government’s unwavering support to take full advantage of this innovation and will ensure we realise its full potential.”

Tony Craddock, director general of trade body The Payments Association, also welcomed the news, saying: “There are too many conflicting and overlapping initiatives, too many stakeholders fighting their own corners, and not enough protection for consumers making payments between bank accounts.”

Jana Mackintosh, managing director of payments, innovation and resilience at banking trade body UK Finance, added: “The UK payments market is strong and well-developed, and we are pleased to see this reflected in the Future of Payments Review. However, we agree that the pipeline for change is congested, and the payments landscape needs to be simplified. We strongly support better coordination between regulators to help smooth the road.

“While we have a mature cards market in the UK, we know there could be more room for choice and innovation. Open Banking could play a key role. As the industry continues its work on the future of payments, protecting customers and enhancing the payments journey will remain priorities.”

Chancellor Jeremy Hunt has promised to review rules on payment authentication in what the government has branded as a post-Brexit fraud crackdown.

Hunt announced on Wednesday that the government will aim to repeal “prescriptive EU-derived payments authentication rules” and introduce new measures under guidance from the City regulator.

The Financial Conduct Authority’s review will specifically focus on the £100 contactless payment cap, which has been in place since October 2021.

The limit was previously increased from £30 to £45.

He added that the government would publish a ‘National Payments Vision’ next year, in line with the main recommendation of Garner’s review.

Arun Srivastava, fintech and regulation partner at law firm Paul Hastings, said: “While there is broad policy alignment with the EU on matters such as reform of data privacy laws to permit broader data sharing, the UK’s approach should be calibrated according to the needs of the UK market. 

“The UK has been more successful than other European countries in encouraging adoption of open banking through the implementation of competition law remedies in addition to changes [in] payments legislation.”