The United Kingdom’s payment ecosystem has undergone significant changes over the past decade, driven by advancements in technology, a shifting regulatory landscape, and a growing demand for security, speed, and convenience among consumers.
Due to this, the UK's government has announced plans to improve its instant payment infrastructure by incorporating a modern ISO 20022-compliant architecture. This move is aimed at making payments faster, simpler, and more secure for businesses and consumers across the country. Learn more about this initiative below!
1. A Decline in the Use of Cash
This trend is expected to continue, with the UK government even proposing to phase out cash completely in the foreseeable future. One way of achieving it is through the introduction of a digital pound, a central bank digital currency (CBDC) backed by the Bank of England.
Although the Digital Pound initiative is still in the early stages of development, three in five of the country’s adults believe that Britain will become a cashless society by 2030 in one way or another.
The drastic decline in cash usage has led to a reduction in bank branches across the UK and also reportedly resulted in ATMs closing at an unprecedented pace, with one machine becoming inactive every two hours. For the same reasons, an increasing number of retailers and businesses choose to no longer accept cash payments.
2. Increased Use of Digital and Mobile Payments
Alongside the decline in the use of cash, the UK has been seeing a surge in the popularity of digital transactions. This trend is largely due to the growth in the number of peopl of e using smartphones and other mobile devices, as well as the convenience and speed of these payment methods.
Another key driver of the shift towards digital payments has been the rise of contactless technology. Contactless cards, which enable consumers to make payments by simply holding their card near a reader, were first introduced in the UK in 2007. Since then, their use has grown rapidly, with contactless payments now accounting for more than 50% of all card transactions in the country.
3. The Emergence of Open Banking
One more major change in the UK payment landscape has been the emergence of open banking. This initiative was introduced in 2018, enabling consumers to share their financial data with third-party providers and promoting the development of new financial products and services.
The effects of open banking in the UK include:
What’s more, 2023 looks very promising for the further evolution of open banking in the UK, as it is expected that the regulators will issue their vision and roadmap for this sphere already in Q1. The publications are likely to cover such topics as:
4. Advanced Anti-Fraud Measures
To address this issue, the UK government has introduced a number of additional initiatives besides the standard measures, such as the chip and PIN technology and 3D Secure, including:
5. Upgrades in the Retail and Wholesale Payments Infrastructure
The UK set a course for upgrading its payments infrastructure years ago by introducing initiatives like:
These updates are aimed at making retail and wholesale payments more secure, efficient, and accessible for all parties involved.
Undoubtedly, the UK has managed to construct a strong and scalable infrastructure supported by a forward-looking regulatory framework, which makes it evident that the future of payments in this country is going to be very bright.
What’s more, the UK is investing a lot of resources not only in its national payment systems but also in their cross-border connectivity. Even post-Brexit, the country is committed to maintaining SEPA access and ensuring functional equivalence.
Thus, should the United Kingdom stay true to its selected course in the FinTech industry, we are sure to see it transform its payment landscape for the better at an even faster pace than the one we’ve been witnessing throughout the past decade.
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