The payment systems in this country are often just viewed as the background, mundane processes operating as part of the UK’s banking infrastructure.
But, whether it is cheques clearing, ATMs distributing money or a mobile payment being sent, with millions of transactions occurring every day our payment systems are fundamental to the UK economy.
Much attention in recent weeks has focussed upon the UK launch of Apple Pay and how it will change the marketplace. New products that change customer expectations, create competition and bring innovation to the system are something to welcome. Yet, it is worth reminding ourselves that when it comes to payments, the UK is a world-leader and has been for many years.
Initiatives such as Faster Payments, Chip and PIN, Paym and the Current Account Switch Service have led the way over the past ten years and their success has encouraged many other countries to build their own versions of these services.
When talking about processing payments, for most consumers, businesses and charities, it is banks and building societies that spring to mind.
However, by the latest count there were around 1,500 companies operating in the UK providing a payment service; smaller players and challenger banks feature within this group amongst the usual suspects.
The UK is helped by its strong financial heritage. Not only do we have the City of London, but the government is a keen advocate for turning it into a fintech capital too.
New regulations from both the UK and Europe are opening up the system further. The UK government created the new Payment Systems Regulator (PSR) that aims to encourage more innovation within the collaborative space and competition within the sector.
Equally, the Payment Services Directive 2 from Europe is opening up opportunities across borders and making it easier for new entrants to establish themselves.
Considering the fact that we have 100,000 software companies in the UK, again we have a head start to take the industry forward with any future innovations.
Many innovative start-ups have looked to identify gaps in the payment landscape to create new products that can be adopted by banks and other payment providers. Banks, of course, are also leading on innovation and there are plenty of examples of smaller players having an impact too.
Statistics from the government’s Department of Business, Innovation and Skills (BIS) show that the UK has the largest mobile market in the EU, worth £14bn annually.
This represents a huge opportunity in the development of apps and technology for consumers and corporates. For example, the UK’s cyber security market is valued at around £6bn and growing, and new developments including biometrics are likely to appear in the marketplace in the coming years.
Rather uniquely, for innovation to be successful it must – by nature – be ubiquitous and therefore achieved through collaboration.
Payments UK wants to make sure that in this new payments landscape, the UK is able to maintain its position as a world-leader. We want to ensure that traditional players and new entrants can work together to deliver outcomes that benefit customers, businesses, government and charities. These aims will ultimately help UK plc too.
This year we will be publishing our vision for World Class Payments (WCP), taking an evidence-based approach to answering some very big questions about the future of payments in the UK. The PSR and the Bank of England are both key influencers of this work. Our WCP project brings together a range of stakeholders, which provide or use payments; it will deliver a vision of what payments of tomorrow could look like if they are built on customer needs.
So, in future, if you are paying for your coffee via an app, sending money to a friend using your mobile phone or wiring money to relatives in Australia, it is worth knowing that these developments are supported by a huge industry, many of which are in the UK.