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Six factors driving UK’s payments landscape

Payments UK has published a report on the Changing Payments Landscape, outlining some of the milestones that have altered how businesses and consumers pay from 2005 to 2025.

The report identifies six factors that are driving change in payments:

  1. Customers now expect to be able to shop online or with their mobile devices, and be able to make fast, convenient payments at checkout.
  2. Smartphone technology has introduced new ways to pay, giving customers access to an ever-expanding range of services through ‘apps’ and the ability to pay for anything from taxis to hotels with secure mobile banking.
  3. Greater competition and collaborative developments are being driven by new technologies such as the introduction of contactless technology on cards, Faster Payments or Paym, as well as new fintech entrants in the market.
  4. Improvements to traditional payment mechanisms, such as cheque imaging and polymer bank notes, make paying easier for customers who prefer to do it in this way.
  5. Regulation and legislation continue to define the framework within which payment service providers and consumers interact, exchange data and make payments.
  6. There are now over 2,500 payment service providers in the UK, many of which are new entrants offering new payment products and services. As the UK has become the home of the fintech community the number of payment service providers in the coming years could still grow.

This graph shows the predicted use of eight payment methods in the next eight years. Payments UK predicts that cash will continue to be used less and will become the second payment method after 2020, as the use of debit cards continues to increase. There is also an increase in the use of direct debits, credit/charge/purchasing cards and Faster payments/other remote banking, while there is little change in the use of standing orders and Bacs payments and cheque use continues to converge towards zero.

The report also gives an overview of the UK's regulatory and legislative environment. This includes the launch of the Payment Systems Regulator (PSR) and the Payments Strategy Forum (PSF) in 2015 and the announced consolidation of Bacs, the Cheque and Credit Clearing Company and Faster Payments into a single Payment System Operator (PSO) by the end of 2017. Also, the Open Banking standard, proposed in 2016, will oversee projects such as developing API solutions and more will be announced as the project progresses in 2017. European payments developments also mentioned in the report include: PSD2, SEPA, data protection and anti-money laundering.

With regards to changes that could occur to the UK's payments system as a result of Brexit, Payments UK states: “In the medium to long-term, legislative and structural changes resulting from Brexit are likely to impact the way in which UK payments are regulated, designed and executed. Much of the financial regulation applicable in the UK is derived from EU legislation and will remain applicable until any changes are made by Government and Parliament.”

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