Q&A: Pay.UK’s chair on the future of retail payments

By Emma Olsson | 17 June 2020

Before chairing Pay.UK, the UK’s standard setting body for retail payments, Melanie Johnson chaired The UK Cards Association – now part of UK Finance – for eight years. She talked to bobsguide about the UK’s new payment architecture (NPA), reducing fraud and overseeing the country’s payment systems during coronavirus ahead of her resignation in December.

What was it about payments that attracted you initially?

Payments and cards are both quite fascinating because they are things that enable our everyday life that we all take for granted in one way or another. Like turning on the tap and you get water out the other end – you don’t actually think as a consumer very much about how that’s all provided and yet, it’s obviously something that we need every single day and we use every single day. I think with the universality of it and the fact that there’s a lot of technology change going on which means that there are lots of exciting developments; it’s not difficult to get excited about it to be honest.

What has gone into creating the NPA and what was the vision?

We have payment systems that run on old rails and those rails are quite idiosyncratic; they’re not built on international standards. If you think about it as different gauges of railway lines, the one that we are building is the international standard, ISO 20022. It is a system which is used by a lot of international banking. It’s universal across lots of parts of the globe and carries a lot more potential within the payments instruction that runs from one organisation to another on behalf of a business or a consumer. It carries a lot more data about what that payment’s about, where it came from, who the sender was, and maybe it could ultimately carry things like an invoice number to be reconciled for a business that’s receiving it. It carries a lot more information basically than the old systems can manage.

We’ve always been very proud of payment systems in the UK – they’ve pretty much always been world leaders. Faster Payments was a very innovative, speedy payment system aimed at consumers that has really taken off over the 10 years or so of its life to date. And we want to stay ahead of that and develop things because it does impact on the economy, how easy it is to make payments. Quite a lot of payments are currently on cards, but there’s always the potential in the future that more payments will come away from cards and ultimately go through the ordinary payment systems like Faster Payments for example. So, this is what the system is designed to do – it’s designed to take a lot more data from one end of the transaction to the other, that should make it harder for scammers and fraud to happen.

We’re also responsible for overseeing a whole ecosystem beyond the initial rails that run the payments. There are a lot of layers of activity over and above that, which are things like use of Confirmation of Payee which we write the standards for but don’t build – the banks themselves are responsible for their own provision of that. Those things enable consumers to check that they’re sending things to the right person … And we know already that for authorised push payment (APP) fraud there’s been a dramatic drop since some of the large banks have been introducing this recently. It will soon be very widespread across the banking system. It’s been a little delayed in one or two places because people have wanted to make a change for consumers because of the current coronavirus situation, but it’s very widely being rolled out and it will make a huge difference to some of the fraud that happens there.

How much do you think coronavirus is going to impact the ability to deliver the NPA?

There’s nothing being postponed because of it yet. At the moment everyone’s got a lot of other preoccupations, including us, in making sure everything runs very smoothly. So I don’t think it’s the case that it will necessarily impact on the timescale; it may well have impact though on how we do it and trying to do it in a way that’s safe and as easy as possible for everybody that’s concerned.

Have there been any inhibitors to the progress?

I never really think about inhibitors to be honest. I think there are a lot of opportunities in fact for greater control and choice for consumers and for business users eventually as well. There aren’t really inhibitors, but it’s a very complicated thing to do. Payments is a network, so things run through from you to your bank and through the system to another bank and then ultimately to whoever you’re trying to pay. And that is quite a complicated network of things that have an end to end nature all the time, and so change is always difficult in those environments, but we’re working very closely with the banks and with a lot of other organisations with delivering this.

How do you maintain an element of competition in the space?

There will be more competition. There already has been much more competition than there always has been, because a lot more banks are able to connect directly to our payment systems and they do so. There are a lot more banks out there than there used to be and we are devising a system that will be as fair as possible and provide a level playing field for all the banks to connect directly into our systems.

That’s an important thing from the point of view of the banking competition landscape, but on top of that there are a lot of organisations who want to provide these services to consumers. We wrote the rules for Request to Pay, but there are a lot of tech companies out there who are providing the actual way of operating or the configuration that will operate Request to Pay for the banks and other providers … We see a lot more of that happening over the coming years.

When do you hope that this will all be accomplished by?

I don’t think I want to put a figure down. It does require everyone in banks to be able to implement things, it does require us to go through a procurement process. There are a lot of loops to be gone through before we get to this point, but in a few years’ time.

And what’s next for you?

One of the things that we’ve been involved with as well involving coronavirus is we worked closely with the HMRC to develop the necessary payment overlay services which were put into the system to support the self employment income support scheme. We did that with support from NatWest and it had a partner called SurePay to make sure that safe integration took place, so we put in part of Confirmation of Payee for the name checker service. We’ve been working closely in the current environment with people to actually support some of the developments that the government’s putting out to try and help businesses and individuals in the current situation.

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