The payments landscape continues to evolve and this blog shares some of the topics that caught my attention during the last month. If you think I’ve missed anything important, do please send an email to technical@treasurers.org.
Regulatory announcements
- HM Treasury, the Competition and Markets Authority (CMA), the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) published a joint statement on the future of Open Banking that they are working together to provide a vision and propose a constitution for the future open banking entity, ensure a smooth transition from the Open Banking Implementation Entity, and oversee the new entity once it is set up. It also announced the creation of a joint regulatory oversight committee led jointly by the FCA and the PSR to deliver this.
- The PSR issued a consultation to direct around 400 more financial firms to introduce Confirmation of Payee (CoP) protection in two phases:
- The first group will be prioritised based on the complexity and size of the institution and/ or firms where the adoption of CoP could have the biggest impact in preventing APP scams. This first group would see an increase of CoP coverage from 92% of transactions made via Faster Payments to 99%. This group would need to have implemented CoP by 30 June 2023.
- The second group includes all other firms which use either unique sort codes, or that are building societies using a Secondary Reference Data (SRD) reference type. This group would need to have implemented CoP by 30 June 2024.
- The PSR published its report on the Digital Payments Initiative. It concluded there are four high-level areas that need to be worked on to address the drivers of cash reliance and enable greater take-up of digital payments. These are:
- improving consumers’, small businesses’ and other small organisations’ awareness and understanding of, and trust in, digital payment options
- tackling barriers to new digital payment services and service features, including enabling new functionalities and improving trust by addressing fraud risks
- reducing digital exclusion; and
- putting better data in place to monitor the transition to digital payments.
- The EU Commission has launched a set of consultations on the revised Payments Services Directive (PSD2) review and open finance. Under the digital finance and retail payments strategies, the Commission is conducting a comprehensive review of the application and impact of PSD2, including an overall assessment of whether it is still fit for purpose, taking into account market developments.
The consultation on PSD2 seeks views on whether the Directive has achieved its objectives and whether amendments are needed to ensure that its rules remain relevant. The Commission has also launched a separate targeted consultation seeking views from stakeholders with more in-depth and technical knowledge in order to inform the Commission on the application and impact of PSD2 taking into consideration, among others, developments in the payment market, payment user needs and the need for possible amendments.
The consultation on the open finance framework and data sharing in the financial sector seeks views on the broader concept of 'open finance', which could cover a range of financial services, such as investment in securities, pensions, and insurance. A separate targeted consultation seeks input from professional stakeholders that have a more in-depth knowledge or working experience in the field of payments. These include, among others, payment service providers (PSPs), national and EU authorities and regulators, and payment experts.
Comments on the consultation on the open finance framework are due by 2 August 2022. Comments on the targeted PSD2 consultation are due by 5 July 2022.
- The Federal Reserve recently reported that it officially began onboarding pilot participants onto the FedNow Service, “signaling that the initial testing phase of the FedNow Pilot Program is underway.” A few organizations have now successfully “connected and delivered test messages over a pilot version of the FedNow Service, marking a key milestone for the service, which remains on course to launch in 2023.”
- The Bank for International Settlements introduced a framework of best practices to self-assess the access arrangements of key payment systems, especially real time gross settlement (RTGS) systems, as part of the G20 cross-border payments programme.
- Access to key payment systems is a foundational element in the safe and efficient provision of cross-border payment services, fostering greater competition and innovation, resulting in more choices and better pricing for end users. Direct participation by banks and non-banks can reduce the number of intermediaries and lower prefunding costs assumed by those market participants without access to the payment system. Participation in RTGS systems – typically owned and operated by central banks – is critical for payment service providers to settle obligations among them in central bank money. However, only a minority of RTGS systems currently provide access to three important types of cross-border payment provider: non-bank payment service providers, foreign banks and financial market infrastructures. Thus, there is scope for many jurisdictions to consider improving access to RTGS systems and other key payment systems that settle in central bank money.
Interesting reports
1. The European Central Bank commissioned a report from Kantar on New Digital Payment Methods. As well as guides to each of the 27 EU countries, it assessed the understanding of the current payment habits of citizens of euro area countries and specifically their attitudes towards digital payment methods. In addition, explored the user perspective on new digital payment methods and potential key features which could drive the adoption of a new digital means of payment with a view to further informing the Eurosystem’s investigation of a possible digital euro.
2. The GSMA issued its annual report on the state of mobile money. It includes the following infographic:
3. Adyen has issued its 2022 Retail report in conjunction with KPMG interviewing over 10,000 merchants and 40,000 consumers across 26 markets. It includes the following 5 findings:
- the time to invest in digital transformation was yesterday
- flexible customer journeys are the future of retail
- technology is key when building customer loyalty
- physical stores aren’t dead, but need a tech makeover
- make informed operational decisions with payment data
4. The Financial Crime and Fraud Report 2022 identifies the innovation and development of best practices and instruments used by financial institutions in their fraud prevention activities, to improve the digital onboarding process of their customers while fighting against financial crime. The report includes an infographic displaying the most relevant players and solution providers, along with complete company profiles of technology providers specialised in fraud prevention and financial crime detection/prevention.
