Earlier in the year, we published an article considering the findings of the 2023 UK independent review into the Future of Payments, which you can read here. This review, launched by the Chancellor of the Exchequer, also considered plans for new legislation to allow for reform and innovation within the sector. We addressed the ways in which banks can maintain their competitive edge yet also remain compliant. Now we are in the final quarter of the year, we wanted to revisit the key points and consider whether the landscape has changed.
Consumer Experience
Many customers still probably do not consider how many different payment transactions they complete and payment systems they use daily. Tap with a phone to pay for groceries, use a physical card to pay for goods, complete an online contactless purchase or receive salary paid into a bank account; all these use different systems.
Set against a backdrop of falling cash transactions and rising Open Banking and API-based capabilities, this is both an exciting and challenging time for financial institutions. The biggest question remains unsolved; how can banks keep their customers happy whilst trying to juggle the ever more onerous demands of in-person, online and person-to-person transactions? It is also important to note that for banks to truly be able to innovate their consumer payments experience, they need to be guided by outcome-based regulations rather than detailed (and limiting) requirements.
Regulatory Oversight
Just what does it take for a bank to remain compliant, and meet their regulatory obligations, whilst still managing to change and innovate? In the UK there is the additional responsibility of working with the dedicated Payment Systems Regulator (PSR) set up to ensure that as payment systems evolve, they work well for everyone.
Being ever ready to embrace change and improve the customer experience is key to future success and longevity in the financial services sector. We think the landscape remains the same, where a bank’s key objective should be to align and prioritise regulatory initiatives with clear and agreed outcomes. To stay ahead of the curve, firms need to adopt a pragmatic but agile approach to ensure they can adapt and thrive in the face of uncertainty and change.
Open Banking
The development of the alternative payment journey offered by Open Banking is huge. The payment process in the UK can be a painful one, involving entering account numbers and sort codes for each transaction. Perhaps there is much to learn from countries like Sweden where the process is streamlined and much faster.
The UK is already acknowledged as a market leader in Open Banking development but there are issues to be resolved before its full potential can be realised. What are the main obstacles preventing progress, and how can they be overcome?
The UK is acknowledged as a market leader in Open Banking development, but there are issues to be resolved before its full potential can be realised.
No one is immune from fraud and cases are rising. Banks carry a responsibility to reimburse customers who have been victims of fraud. What practical steps can be taken to tackle and reduce fraud and scams? Is there a collective approach that could benefit both banks and their customers? What should the main objective of any new initiative be?
The use of digital wallets is enjoying a growth-spurt. Front-end payment services like Apple Pay and Google Pay were early adopters, but the scope of these transactions is expanding rapidly. Customer satisfaction when using the wallets appears high, and it is therefore important to respond to consumer preferences as their choice of payment option evolves.
Another area to consider is re-platforming. Whilst the outcomes of moving systems and creating new environments are undeniably positive (improving performance, security, scalability, and reducing costs); Projective Group have seen through first-hand experience relocating core banking architecture with many clients, that the extent of this change and the process required should not be underestimated.
We have seen through first-hand experience relocating core banking architecture with many clients, that the extent of this change should not be underestimated.
Regardless of the specific applications, it is even clearer now that Open Banking is already fostering innovation, boosting consumer protection, increasing scope for investment, and contributing to a competitive Payments ecosystem in the UK.
At Projective Group, we partner with our clients to build their market infrastructure, help to introduce payment innovations, and offer them specialist education as well as core banking and corporate payment advice. Our involvement across several banking change programmes has led to deep expertise in specific solution areas too, such as DORA, ESG and Maturity Assessments for leading financial institutions.
Originally published for The Payments Association (September 2024)
About Projective Group
Established in 2006, Projective Group is a leading Financial Services change specialist.
We are recognised within the industry as a complete solutions provider, partnering with clients in Financial Services to provide resolutions that are both holistic and pragmatic. We have evolved to become a trusted partner for companies that want to thrive and prosper in an ever-changing Financial Services landscape.