The Bank of England is pursuing a public consultation on consumer payments, focused on making it easier for shoppers to pay without using a debit or credit card. The process could pave the way for a UK-based instant payments system akin to Brazil’s Pix or India’s UPI.
The announcement came during a speech by Sarah Breeden, the BoE’s Deputy Governor for Financial Stability. She cited Pix and Sweden’s Swish as examples of national systems that have succeeded by offering seamless mobile payments. “We want UK consumers to have the option to pay retailers in-store or online directly out of their bank accounts as a complement to doing so via card schemes,” Breeden said.
Setting Up Competition
Debit and credit cards currently account for nearly two-thirds of transactions in the UK. One reason Breeden gave for launching the consultation was the hope that greater competition could lower transaction fees for smaller retailers, which in the UK can pay up to four times more than large chain stores to accept card payments.
“The payment scheme would enable direct payments for consumers at the storefront, bypassing the card networks entirely,” said Ben Danner, Senior Analyst of Debit at Javelin Strategy & Research. “The goal is to lower cost for retailers on payment processing by sidestepping the networks, and ideally those retailers would pass on the savings to consumers.”
Retail payment systems would need to support multiple forms of money. Breeden emphasized that stablecoins—jointly regulated by the Bank of England and Financial Conduct Authority—are likely to be used for real-world payments, not just crypto transactions.
Slow on the Uptake
Still, given the popularity of credit cards in the UK, an open banking scheme may take longer to gain traction than it did in Brazil or India. Both countries entered the transition with far less mature payments infrastructures than the UK has today.
“Like anything in payments, there is going to be a period of growing awareness, adoption, and then ubiquity as it co-exists among all the other ways to pay,” said Danner. “As digital payments continue to grow, retailers will welcome the lower processing costs.
“However, I don’t expect some kind of mass exodus from traditional card products. Customers will need an incentive to switch to this system. Merchants can offer incentives to use the lower cost account-to-account method, such as a discount.”
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