“I do not know at this stage whether blockchain technology will work at scale,” said Rt Hon Lord Freud, minister of state for Welfare Reform, Department for Work and Pensions.
Speaking at the Payments Innovation Conference, held in London today, Lord Freud was referring to a report drafted by Mark Walport, chief scientific adviser to HM Government, which detailed how distributed ledger technology could be used to distribute pension and welfare payments in the UK.
Despite acknowledging that blockchain’s potential was yet to be seen, Lord Freud added that he was “committed to improving the experience for those who rely on welfare payments”.
At the heart of government
During his opening address, Lord Freud also reflected on the changes to the payments industry over the last couple of years and spoke of his department’s need to remain involved in innovation in the realm of payments.
“Government is watching this and becoming involved with a real focus. I personally remain a really strong advocate of this concept because the distribution of resource and payments is really at the heart of government,” said the Lord.
Government, he said, currently pays out £3.8bn on a daily basis and does so using the UK’s payments systems. “My own department,” he added, “is the biggest user of the UK payments system. We distribute £167bn to 22 million people.”
With this in mind, Lord Freud called for an effective payments system and one that would safeguard the competitiveness of the UK.
In terms of challenges, Lord Freud said the issue was to continue driving innovation in payments in such a way that it would benefit every participant in the system.
Technology, he added, has the potential to compliment a wide range of government strategies which would enable it to reduce administrative costs and most importantly increase security and reduce both fraud and error.
“There is still a lot of work to do. It is not clear to me who will deliver this vision, how and what technology will be used,” said the Lord, adding “We can see, however, the advent of different technologies which may offer the solution”.
Brexit on payments
Maurice Cleaves, CEO of Payments UK spoke about the potential impact of Brexit, noting that it would have “no immediate effect on payments or payments regulation”.
Moving on from the results of the referendum, Cleaves highlighted the opportunities offered by collaboration between incumbents in the payments industry.
“Open APIs offer significant opportunities for the industry. They could have a fundamental impact on customer and bank relationships, and alter the landscape significantly,” said Cleaves.
Today, he added, consumers are spoilt for choice when it comes to paying. “Never have we had so much choice in terms of the technology that we use to pay,” he noted, adding that cash continued to be the most popular payment method among consumers today.
Consumer freedom
Julian David, CEO of techUK agreed, highlighting the variety of payment methods currently available to the public.
“We now have the conjunction of payments and social media,” said David. “We also have digital currencies. Consumers expect more freedom in the way they pay and the markets are responding to that.”
David also spoke about the Brexit referendum, arguing that Brexit should not change the UK’s prominence in the global FinTech arena.
“One of the things that we don’t want to change is the UK’s position at the centre of financial services and FinTech.
“There are plenty of reasons why the UK should still be at the centre of these things, but we do need to get things right as we go into the future,” added David.
Access to trade and skills, he noted, is essential if the UK’s FinTech – and payments industry – is to evolve adequately.
“We clearly need to stay open to data – how you move it, how you manage it and how you secure it … We need to be open to innovation. If we get these things right, we may be able to keep calm and carry on,” concluded the CEO.
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