The UK's National Payments Vision: an ambitious blueprint for growth

At a glance

• The UK's new National Payments Vision, unveiled in the Chancellor's Mansion House speech on 14 November, is an ambitious blueprint to re-establish Britain as a leader in retail payments innovation.
• The vision aims to revitalise the sector by simplifying regulation, modernising infrastructure, and fostering collaboration between government, regulators, and industry. It also demonstrates a clear commitment to embracing innovation.
• The new Payment Vision Delivery Committee, with its senior leadership and focus on tangible outcomes, supported by a public-private collaboration (in the form of a Vision Engagement Group), offers a strong foundation for progress.
• The vision addresses – to varying degrees – a range of high-priority initiatives, including modernising Britain's retail payments architecture, Open Banking, digital identity, central bank digital currencies, and security and fraud measures.
• Challenges remain, but the vision has the potential to re-establish Britain as a global payments leader and was well received by industry. Success will depend on sustained focus and decisive execution.

Overview

In her Mansion House address on 14 November, Chancellor Rachel Reeves unveiled the National Payments Vision (the Vision), an ambitious plan to re-establish Britain as a global leader in payments innovation. The Vision responds directly to the independent Future of Payments Review 2023¹ (the Garner Review) and is a cornerstone of the Chancellor’s broader strategy to revitalise the financial services sector and drive economic growth. It acknowledges and sets out a new approach to alleviate industry concerns regarding regulatory complexity and excessive risk aversion. It also takes some decisive steps to address challenges that have plagued the renewal of the payments system and the realisation of Open Banking’s full vision.

However, the Vision’s success hinges on specifics, many of which remain undefined. Rapid, focussed implementation, coupled with genuine collaboration among the government, regulators, and industry, is essential to transform this high-level strategy into actionable outcomes.

Click here to read our separate analysis of the broader Mansion House package.

A new Payment Vision Delivery Committee 

A crucial step at the heart of the Vision is the creation of the Payments Vision Delivery Committee (PVDC), chaired by the Director General for Financial Services and Financial Stability at HM Treasury (HMT). The PVDC’s primary mandate is to align priorities across the sector by reducing regulatory silos, addressing a critical weakness highlighted in the Garner Review. By fostering a clear, proportionate, and forward-looking regulatory framework, the committee seeks to build a foundation for sustainable growth.

The PVDC's immediate deliverables are twofold:

1. Guiding infrastructure upgrades: by the end of Q2 2025, the PVDC will define a new approach, spearheaded by the BoE and PSR, to modernise the UK's retail payment infrastructure. This will effectively supersede the stalled New Payments Architecture (NPA) programme and will encompass a governance and funding model, including potential reform to Pay.UK. (see more details below)
2. Payments forward plan: the PVDC will release a comprehensive roadmap of payment system initiatives within 9-12 months. This roadmap should aim to reduce duplication, encourage collaboration, and provide a unified vision for innovation.

The PVDC will initially run for 9-12 months – the timeframe for completing the deliverables outlined above. Its future role will be assessed thereafter.

The seniority of its members signals a serious commitment to reform. The PVDC’s governance structure will include two Deputy Governors from the BoE, the Chief Executive of the Financial Conduct Authority (FCA), and the Managing Director of the PSR. However, with timelines for the key deliverables stretching well into 2025, uncertainty remains around the direction of execution of the vision for the payments industry. To maintain momentum, the PVDC may need to establish interim milestones and communicate progress on objectives in a transparent manner. 

Supporting the PVDC’s work is the Vision Engagement Group (VEG), which will include industry stakeholders, chosen through an open application process. This public-private partnership model was welcomed by industry and has the potential to deliver substantial, long-term, and inclusive transformation. However, its success hinges on the VEG's ability to represent the perspectives of a very diverse industry, achieve consensus on key issues, and ensure its views are tangibly factored into the PVDC's final decisions.

Growth as a “defining mission” and new remit letters to regulators.

The UK government's recent remit letters to UK financial regulators underline growth as a "defining mission", alongside proportionality. This focus is reinforced in a separate letter on payments - jointly addressed to the FCA and PSR, and copied to the BoE and PRA. In the pursuit of growth, the FCA and PRA are also urged to embrace a greater appetite for risk, enabling more “informed and responsible risk-taking" by firms. This will be a difficult balance for regulators who have to square this expectation away with their primary objectives to manage risks in the financial services sector. Indeed, Nikhil Rathi, the CEO of the FCA highlighted recently that navigating this balance will require a more “candid conversation” among regulators about their “collective risk appetite”.²

In the remit letter, the government also directs the regulators to prioritise the development of a payments framework that strikes a balance between robust oversight and the flexibility necessary for fostering innovation. As part of these reforms, the FCA will assume a leading role in coordinating policy overlaps with the PSR, including in high-priority areas such as Open Banking and fraud prevention. This, along with the work on payment infrastructure, where the BoE will also play a more prominent role going forward, suggests an implicit recalibration of the PSR’s influence and remit.

By Q2 2025, the FCA, PSR, BoE, and PRA will also update their Memorandum of Understanding (MoU) on payments regulation. The revised MoU will emphasise inter-agency collaboration to reduce compliance burdens, particularly for smaller firms, while supporting innovation. Key measures include simplifying information requests and clarifying regulatory responsibilities. Regulators will have to report progress to the government and review these efforts annually. This should help address some of the industry concerns regarding disjointed and duplicative regulatory changes.

Although growth and competitiveness remain secondary to statutory objectives like consumer protection and financial stability, these initiatives signal a more receptive stance toward industry concerns. 

Retail payments infrastructure: a pragmatic pivot 

One of the most significant, if unsurprising, decisions in the Vision is the move to effectively halt and re-evaluate the NPA programme, fundamentally changing its scope and approach.

Initially conceived as a transformative overhaul of the UK's retail payments infrastructure, the NPA became synonymous with regulatory overreach and protracted delays. Instead, the BoE and the PSR, through the PVDC, will now adopt a more pragmatic and flexible approach, accounting for future technological developments, particularly distributed ledger technology. This revised approach centres on three core priorities:

1. Define short-term necessary upgrades to the existing Faster Payment Systems (FPS).
2. Evaluate long-term requirements for retail payment infrastructure beyond FPS.
3. Establish governance and funding frameworks, including potential reforms to Pay.UK - the operator of the UK's retail interbank payment systems.

This shift in approach, including a more phased rollout of infrastructure upgrades, reflects a more pragmatic strategy. However, details remain scant. For example, the Bankers' Automated Clearing System (BACS)'s long-term role requires clarification, and the future of cheques is even more uncertain. Greater clarity on the scope, funding mechanisms, and timelines of the initiative is essential to secure industry buy-in. 

Stablecoins and the "Digital Pound"

The government has also asked the BoE and PSR to address concerns about overlapping investments and capacity in competing initiatives – such as retail central bank digital currencies (CBDCs), stablecoins, and the Regulated Liability Network³. 

Aside from this, the Vision remains notably silent on the role of stablecoins in the future payments ecosystem. This omission is all the more striking given the ongoing work by the FCA and the BoE to develop a framework for stablecoins in retail payments – though progress appears to have stalled since December 2023. This silence however aligns with the broader lack of clear pronouncements on regulatory frameworks for digital assets since the government took office. Uncertainty around the policy position and lack of regulatory clarity risks stifling investment and responsible innovation in the sector.

The government, however, reaffirmed its commitment to exploring a retail CBDC, or "Digital Pound," in partnership with the BoE. Currently in the design phase, the government emphasises the need for safeguards such as user privacy and Parliamentary oversight. As such, any decision on implementation will require primary legislation and extensive public consultation. Therefore, the jury is still out as to whether the Digital Pound will move from design to implementation. 

Linking with Wholesale Payments and Future Monetary Initiatives

By design, the Vision primarily focuses on retail payments. Therefore, the government emphasises the importance of considering it alongside separate ongoing policy efforts to enhance wholesale payments infrastructure, such as the BoE's Real-Time Gross Settlement renewal programme and whole CBDC pilots.⁴ More generally, the Vision also recognises the importance of broader work on innovation in money and payments – both retail and wholesale – currently being undertaken by the BoE. 

Open Banking: unlocking its full potential

After a period of stagnation, open banking has received a welcome boost from the Vision. This initiative aims to deliver "seamless [A2A] payments—enabling consumers to pay for goods and services in shops and online directly from their bank account." Achieving this ambition, however, hinges on effectively addressing existing regulatory and commercial challenges. While the Vision acknowledges these hurdles, the proposals do not fully address how swift progress will be made in overcoming them. 

A promising development is the appointment of the FCA as the sole regulator for open banking, replacing the overly complex governance of the Joint Regulatory Oversight Committee⁵. This consolidation should streamline oversight and pave the way for a more coherent framework for both payment initiation and data-sharing services. Furthermore, the FCA's expanded remit under the Smart Data provisions of the forthcoming Data (Use and Access) Bill will foster interoperability and efficiency as open banking evolves into Open Finance. A single lead regulator will also facilitate connections with broader smart data-sharing schemes across other priority sectors such as utilities and telecoms.

As anticipated, a new governing body will supersede Open Banking Limited to oversee a regulated Open Banking scheme, forming part of a long-term regulatory framework currently under development. This framework would also address consumer protection gaps for A2A payments compared with card payments, including issues like refunds and clear liability structures. Meanwhile, a dispute resolution process, jointly overseen by the FCA and the PRS, will be introduced to bolster consumer confidence. However, details and an implementation timeline for this long-term framework remain worryingly vague and is likely to hamper the scaling and adoption of open banking solutions.

The government has also tasked the FCA with developing the commercial model for e-commerce use cases as a strategic priority, building on the existing pilot for Variable Recurring Payments. 

This brings us to the elephant in the room: establishing a sustainable commercial model for Open Banking. On this front, the Vision strikes the right notes, but a clear path forward remains elusive. Concerns persist over the current imbalance in investment and incentives. Free APIs, widely utilised by Big Tech, have dampened data holders' enthusiasm for innovation. The government proposes exploring reciprocal obligations or fair compensation arrangements for large-scale APIs use by major players, while safeguarding the business models of smaller FinTechs.

The government reiterates its preference for an industry-led approach to the commercial model, one that incentivises data holders to invest beyond the minimum regulatory requirements. However, it also expects this to be delivered quickly and in a manner that supports effective competition.

We view this as the industry's last opportunity to proactively address this long-standing issue. Regulatory intervention may become unavoidable if the industry fails to act decisively. Therefore, the future of open banking hinges on the industry's willingness to embrace change and collaborate on pragmatic, viable solutions.

Digital Identity

On digital identity, the UK government has taken a less ambitious stance. It has reaffirmed plans to establish a framework for digital verification services through the Data (Use and Access) Bill, granting digital identities the same legal status as traditional paper documents. The legislation will enable certified providers to offer secure and efficient identity checks, simplifying processes for payments transactions, for example by eliminating the need for sort codes or account numbers in some cases.

Financial services remain a priority sector, with the government collaborating with initiatives such as the Centre for Finance, Innovation and Technology to explore digital verification as a tool against economic crime. However, the government has reiterated its decision not to pursue a mandatory digital ID system, setting itself apart from the more centralised approach adopted by the EU, for example. Consequently, the responsibility for fostering widespread acceptance and uptake of digital identity within financial services, including payments, will fall to industry. Its success depends on creating the right incentives and seamless user experiences that drive adoption. 

Security and safety of payments

Fraud prevention remains a cornerstone of the government’s strategy for a secure and efficient payments system, with a focus on proportionate regulation that encourages innovation and prioritises customer experience. The government reconfirmed plans to revoke the Strong Customer Authentication (SCA) regulations embedded in the Payment Services Regulations 2017. This change will allow the FCA to adopt more flexible, outcomes-based SCA rules designed to strengthen fraud prevention without imposing undue burdens on users.

Pressure is also mounting on major technology and telecommunications companies to take decisive action against fraud proliferating on their platforms and networks. The government has called for demonstrable progress, with outcomes set to be reviewed at the Joint Fraud Taskforce in March 2025. This timeline highlights the government’s commitment to sustained vigilance in tackling financial crime. However, questions remain around whether political pressure alone, absent stricter regulatory mandates, will suffice to drive meaningful change.

Conclusion

The Vision has been received with cautious optimism by the industry, which feels its concerns have been acknowledged and addressed. The practical implementation approach will take shape over the course of 2025. While the vision may not fully resolve longstanding challenges, such as the commercial model for Open Banking, it provides a strong foundation for further progress. Crucially, it sets a clear path for the future of retail payments in the UK, reflecting a collaborative approach that has resonated with stakeholders.

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References

1 https://www.gov.uk/government/publications/future-of-payments-review-2023

2 https://www.fca.org.uk/news/speeches/growth-mission-possible

3 The Regulated Liability Network (RLN) is an industry-led initiative positioned as a financial market infrastructure (FMI), operating a shared ledger with central bank money, commercial bank money and electronic money on the same network.

4 https://www.bankofengland.co.uk/paper/2024/dp/the-boes-approach-to-innovation-in-money-and-payments

5 Cross-regulatory authority comprising the FCA and PSR, with HM Treasury and the Competition and Markets Authority as the other members.