The Bank of England has initiated a public consultation on consumer payments aimed at enhancing convenience for shoppers who prefer not to use debit or credit cards for transactions. This initiative might lead to the development of an instant payment system similar to Brazil’s Pix or India’s UPI.
Setting Up Competition
The announcement was made during a speech by Sarah Breeden, the Deputy Governor for Financial Stability at the Bank of England. Citing successful national systems like Pix and Sweden’s Swish, she highlighted that these platforms offer seamless mobile payments. “Our objective is to provide UK consumers with an alternative option to pay retailers in-store or online directly from their bank accounts,” said Breeden.
Debit and credit cards currently dominate nearly two-thirds of transactions in the UK. According to Breeden, introducing a new payment scheme could reduce transaction fees for smaller retailers, who often bear higher costs compared to large chain stores.
The Payment Scheme
De Breeden noted that this payment system would allow direct payments at storefronts without relying on card networks. “By sidestepping these networks, the goal is to lower processing costs for retailers and ultimately pass those savings onto consumers,” explained Ben Danner, a Senior Analyst of Debit at Javelin Strategy & Research.
Breeden also emphasized that stablecoins—jointly regulated by the Bank of England and Financial Conduct Authority—are likely to play a role in real-world transactions beyond just cryptocurrency exchanges.
Slow on the Uptake
Despite its potential, an open banking scheme may take longer to gain traction in the UK due to existing preferences for credit cards. Both Brazil and India had less developed payment infrastructures when transitioning compared to today’s landscape in the UK.
“Like any changes in payments, it will require a period of increasing awareness, adoption, and eventual ubiquity as it coexists with other forms of payment,” Danner commented. “Digital payments continue to grow, and retailers welcome lower processing costs. However, I do not expect a complete shift away from traditional card products. Customers need incentives to use the new system, such as discounts offered by merchants.”
