Out-Law News | 20 Nov 2015 | 11:02 am | 3 min. read
London's thriving community of financial technology businesses; the investment made into payments infrastructure; evidence of the range of new payment features from leading banks and technology companies, such as in mobile payments, and the approach the Financial Conduct Authority (FCA) takes to innovation are among the reasons the UK leads the world in payments, according to panellists at a global payments conference hosted by Pinsent Masons, the law firm behind Out-Law.com.
However Mark Hale, interim chief executive of the payment system CHAPS, said that the UK should only be described as being a "world class" market for payments relative to other countries. He said there is still "a lot to do" for the UK to be truly world class in payments.
"Technology has changed the expectation and what 'world class' is," Hale said.
Hale highlighted a Payments UK report from earlier this year which looked at what is required to deliver world class payments in the UK.
Payments UK identified the need to attach more detailed information to records of electronic transactions as one of four things that need to happen to ensure the UK's payments market remains "world class". It said that making it easier for all payment service providers to access payment systems, helping customers to confirm the correct recipient of payments before payments go through and giving customers greater control over the timing of outgoing payments also need to be prioritised.
Lukas May, involved in international growth and regulation at peer-to-peer money transfer service TransferWise, said EU payments laws have "enabled innovators to enter the payments market" and said he believes it is "a false dichotomy" for regulation and innovation to be seen as competing concepts.
May said regulation "can be a source of competitive advantage, especially for new companies" that can use modern technology and software to achieve compliance. He said TransferWise is able to meet anti-money laundering obligations using technology and that this is a source of competitive advantage for it.
However, May, formerly of the FCA, said that speed of regulatory change is important to help open up markets to innovators. He cited an example of regulatory change in Korea where he said the process of opening up the foreign exchange market to non-banks is likely to be completed less than a year after being commenced.
"Within a year it has gone from a closed market to one where there is potential for innovation," May said.
Matthew Williamson, global head of payments at bank software provider Misys, said consumer adoption and not merely new technology will be central to "game changing" innovation in payments. He said "continuously evolving" regulation presented a challenge to banks, but that they can deliver the quick, easy and transparent service customers are looking for by collaborating with financial technology companies. Williamson separately discussed cloud adoption and payments data in an interview with Out-Law.com at Pinsent Masons' global payments conference.
Other panellists at the conference looked at the potential practical impact of the UK government's initiative to open up access to bank customers' financial data through the standardisation of open APIs. The UK initiative is being developed separately to new EU payments laws, now finalised, which are also designed to open up access to payment accounts and data.
APIs allow different pieces of software to interact with each other. In a banking context, they would allow consumers to grant access to their data to different applications; for example, portals allowing them to manage accounts with different providers in one place, or tools enabling them to compare products from difference providers.
Work on the standard is continuing, and Matt Hammerstein, head of client and customer experience, personal and corporate banking at Barclays, told the conference there are "millions of potential use cases" for the data. Hammerstein said those uses are dependent on a "common standard framework" being developed.
Anne Boden, chief executive of challenger bank Starling Bank, said standardised bank APIs could lead to the "disaggregation of some banking services". However, Hammerstein said he was "more excited about the opportunities than worried about the threats" over what the opening up of access to bank-held data will mean for the market.
Rob Haslingden, who heads product marketing and propositions and consumer information services in Experian's credit services division, said he could foresee standardised bank APIs being used to streamline the process of mortgage and other loan applications.
He said the "automatic exchange of bank statements" would help lenders assess the affordability of loans for prospective borrowers, and that there is also the possibility that better access to customer financial data could help reduce fraud.