The Bank of England is working on a payment system that allows consumers to pay retailers out of their bank accounts without using cards, a move that could lower costs for retailers and consumers, the central bank’s deputy governor of financial stability said Monday.
The BoE has formed a Retail Payments Infrastructure Board (RPIB) comprised of banks and societies, merchants and fintechs, as well as Pay.UK, the existing retail payment system operator, and Payment Systems Regulator colleagues, the BoE’s Sarah Breeden said in a speech at the City & Financial Payments Regulation and Innovation Summit.
She pointed to payment systems in other countries as models — UPI in India, Pix in Brazil, and Swish in Sweden — which operate along with cards for retail payments. The central bank is also looking at tokenization and distributed ledger technology for ways to enhance the functionality of real-world retail payments – “including through greater customisability, conditionality, and automation in payments, compared to the standing orders and direct debits of today,” she said.
UK authorities are focusing on three enhancements they want in the next generation of retail payments in the kingdom: 1) account-to-account payment option in-store and online; 2) seamless exchange of traditional and tokenized money; and 3) improved cross-border retail payments that are faster and cheaper than the current system.
The RPIB will oversee the delivery of the new infrastructure design to a new industry-led Delivery Company that will procure and fund the creation of the infrastructure. That’s in the process of being established with involvement from across the industry under chair designate Vim Maru, CEO of Barclays UK, and with support from UK Finance, Breeden said.
The BoE is also looking ahead. “To serve new and unknown needs, the next-generation infrastructure must be built on principles of extensibility, modularity, and flexibility,” Breeden said. “RPIB is now working at pace on what that infrastructure might look like, as well as the scheme design required to support it. We will publish consultations on these issues in the spring.”
The new payment infrastructure will take time. But in the near term, the central bank is encouraging private sector innovations in retail payments that could produce some of the same outcomes, including tokenized deposits and regulated stablecoins, she said.
“Taken together, these initiatives enable us to encourage innovation now while the new retail payments infrastructure is being designed and built — and to take a proportionate approach to mitigating any risks to our public policy objectives,” Breeden said.
U.S. card network stocks were mixed in Monday premarket trading — Visa (V) stock rose 0.6%, Mastercard (MA) edged up 0.1%, American Express (AXP) slipped 0.2%, and Capital One Financial (COF), which owns the Discover card network, rose 0.3%.