Upgrading the UK’s ageing payments infrastructure and increasing real-time payments adoption are forecast to boost the UK economy by £3.4bn – 0.11% of formal GDP – by 2026, according to a new study published by payments software provider ACI Worldwide, data analyst Global Data, and the Centre for Economics and Business Research (CEBR).
The CEBR says the “untapped potential” of real-time payments in the UK is enormous – the theoretical impact of all payments being real time could boost the UK’s economy by up to £87.3bn in 2026, or 2.7% annually.
The research highlights the importance of the UK ‘New Payments Architecture’ (NPA) programme, which will bring sweeping changes to the UK’s payments infrastructure over the next five years, with the aim to enable more innovation and foster competition among UK financial services providers.
Led by Pay.UK, NPA is seeking to modernise the UK’s legacy payment infrastructure by delivering real-time account-to-account payments that provide consumers with more choice and newer, innovative payments options over more traditional payment types such as cards.
The research states that the UK recorded 3.4 billion real-time transactions in 2021, which resulted in an estimated cost savings of £846m for businesses and consumers. This in turn helped to unlock £2.85bn of additional economic output, representing 0.10% of UK GDP.
However, the research also shows that growth rates for real-time transactions are higher in many other countries – emerging and developing countries are leapfrogging the UK to reap the full economic benefits that real-time account-to-account payments bring, the report says.
“By enabling money to transfer between parties within seconds rather than days, real-time payments can significantly improve overall market efficiencies in the UK economy and play an important role in helping facilitate growth,” says Owen Good, head of economic advisory at the CEBR. “Real-time payments improve liquidity in the financial system and therefore act as a catalyst for economic growth.
“Our theoretical modelling suggests the impact of all payments being real time could add 2.7% to formal GDP by 2026. However, this by no means suggests there is not a place for non-instant electronic payments or paper-based cash payments in the future.”
Craig Ramsey, head of real-time payments at ACI Worldwide, adds: “If the UK is to truly capitalise on the potential economic benefits of real-time payments over the coming years, then it must address the urgent need to modernise its ageing payments infrastructure and embrace the New Payments Architecture with open arms.
“The onus is on government and industry to work together to increase adoption, otherwise, despite the head start by the Faster Payment system, the UK risks falling even further behind the rest of the world.”
The NPA programme is creating the retail payment infrastructure that aims to keep the UK at the forefront of payments development. Built on a vision established in 2017 by the Payments Strategy Forum, an initiative of the Payment Systems Regulator, six guiding principles will underpin both its design and delivery. They include:
Philip Smith is editor of The Treasurer