A UK consortium has put plans for a payment rail to rival Mastercard and Visa on the front burner, with meetings among top British banking officials scheduled for this week. The aim is for the new system to be operational by 2030.
Visa and Mastercard currently handle roughly 95% of all card transactions in the UK. The new system, DeliveryCo, is intended to ensure the UK payments network can function even if the U.S. government interferes with their ability to process transactions overseas.
UK Finance, the industry trade body, is coordinating the initiative, with the planning group led by Barclays UK chief executive Vim Maru. Executives from Lloyds Banking Group, Nationwide, and NatWest are also involved. Mastercard and Visa are participating, taking stakes in the project.
A Switch in Attitude
Amid uncertainty surrounding NATO, the UK is concerned that its payments system could be at risk if U.S.-based rails like Visa and Mastercard become unavailable in the EU—or even if U.S.-based rails simply become less attractive to EU banks and consumers.
Historically, there hasn’t been a compelling case for creating new payment rails. EU regulations have kept interchange fees low, so merchants have not faced the same concerns over card acceptance costs as in the U.S.
“There has always been some concern that the only debit scheme in the UK is non-domestic, but the banks there have been happy not to have to pay to build and manage a domestic switch,” said Hugh Thomas, Lead Analyst of Commercial and Enterprise at Javelin Strategy & Research. “It’s only really now, with the U.S. schemes being seen as a potential vulnerability, that the conversation has taken this turn. My expectation is that this will spur a sustained effort to onshore UK debit switching in the long term.”
Prepare for the Worst
For now, UK banks appear focused on preparing for potential risks rather than pushing into the launch of a new UK-based rail, balancing caution with the understanding that the threat is not yet immediate.
“The incredible cost and difficulty in standing up such a scheme in a short period of time would require more than just the threat of losing access to Mastercard and Visa,” Thomas said. “It would need to be something close to a certainty.”
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