UK Finance’s Post

Bank of England Publishes Discussion Paper on Innovation in Money and Payments The Bank of England has released a Discussion Paper on its approach to innovation in money and payments, marking a significant step in shaping the future of the UK payments landscape. 🔶Key Points: 🔹Financial Stability Risks: The paper highlights the risks of financial markets moving away from central bank money and emphasizes the need to preserve its role as an anchor for confidence in the financial system. 🔹Technological Innovations: The Bank will explore enhancements to the Real Time Gross Settlement (RTGS) system and experiment with wholesale central bank digital currency (CBDC). 🔹Retail Payments: Ensuring ease, speed, and confidence in payments for households and businesses across the UK, with collaboration from HM Treasury, the Financial Conduct Authority, and the Payment Systems Regulator. 🔶The Bank invites responses to this Discussion Paper by 31 October 2024. This Discussion Paper is a call for responses to help shape an ambitious and secure agenda for the evolving UK payments landscape. https://lnkd.in/dGFcQNdG #BankofEngland #Innovation #Payments #FinancialStability #RTGS #CBDC #UKFinance #DiscussionPaper

On 30 Jul 2024 the Bank of England issued a discussion paper on “The Bank of England’s approach to innovation in money and payments”. https://lnkd.in/gjKMsMQk I reckon this is at least the eleventh UK consultation on money and payments issued in the past five years, across HM Treasury, the Bank of England and the Payment Systems Regulator (PSR). There may be others I have missed. I have listed below the 10 prior UK consultations about money and payments. UK payments have been in a rut for the past decade – mobile payments failed (Paym), the New Payments Architecture has been spinning wheels for years and Open Banking payments have had a slow start. Is this ever-growing list of consultations from payment regulators and policy makers indicative of this malaise, or is it showing the way out – what’s your view? 1.    28 Jan 2020   PSR Call for input: Competition and Innovation in the UK's New Payments Architecture– response numbers unknown/none published 2.    12 Mar 2020 Bank of England Discussion Paper on Central Bank Digital Currency: opportunities, challenges and design– 132 responses 3.    28 Jul 2020 HMT Payments Landscape Review – 68 responses 4.    7 Jan 2021 HMT UK regulatory approach to cryptoassets and stablecoins: consultation and call for evidence – 89 responses 5.    5 Feb 2021 PSR Consultation on delivery and regulation of the New Payments Architecture - response numbers unknown/none published 6.    7 Jun 2021 Bank of England Discussion Paper on New Forms of Digital Money – 2,539 responses 7.    7 Feb 2023 Bank of England and HMT Consultation on the Digital Pound (and a Technology Working Paper)– over 50,000 responses 8.    11 Jul 2023 HMT Future of Payments Review Call for Input – over 60 responses 9.    6 Nov 2023 Bank of England Discussion Paper on the Regulatory regime for systemic payment systems using stablecoins and related service providers – response numbers unknown/none published 10. 18 Dec 2023 PSR Call for Views on Expanding Variable Recurring Payments– response numbers unknown/none published #payments #paymentsinnovation #digitalmoney #HMTreasury #BankofEngland #PSR

Stability First: Exploring the Bank of England’s Approach to Payments Innovation Read the full blog: https://lnkd.in/dvuvg65d #BankOfEngland #PaymentsInnovation #FinancialStability #TechInBanking #PaymentSolutions #RegulatoryApproach #DigitalBanking #FinancialTechnology #finance #fintech #FinancialIT

Exciting times ahead for the payments landscape! The Bank of England is enhancing its core payments infrastructure to support changing user demands and technological innovations. Find out how they are renewing the RTGS service to drive innovation in wholesale settlement: https://bit.ly/3UGCKcP #BankOfEngland #PaymentsInnovation #RTGSInfraEnhancement

Yesterday, the Reserve Bank of New Zealand (RBNZ) released a consultation document exploring the introduction of "digital cash" as a new form of central bank-issued money, alongside physical cash (in the form of banknotes and coins) and electronic money in bank accounts. Jeremy Muir and I, along with William Ma, co-wrote a summary of the proposal and our views. TLDR version: 📌 The proposed digital cash is not intended to replace physical cash. 📌 RBNZ has not yet decided whether to issue digital cash and is still seeking feedback on the potential benefits. 📌 High-level principles and strategic design options have been released. 📌 If issued it will be accessible by all NZers, including those without a bank account. 📌 Banks & deposit takers are expected to be the most immediately impacted by the proposal, along with everyday users.

Leading UK banks and building societies have come together to write to the Governor of the Bank of England, emphasising their commitment to keeping the UK at the forefront of payments innovation. A secure and efficient payments sector is crucial for economic growth and prosperity. However, the UK faces challenges, including competing priorities and regulatory pressures. Read on for more: https://heyor.ca/VDO9PC #PaymentsInnovation #BankofEngland #UKFinance #EconomicGrowth #FinTech

Shaping the Future of Payments: Bank of England’s RTGS Roadmap Victoria Cleland, Executive Director for Payments at the Bank of England delivered a speech unveiling the future roadmap of the Bank’s Real-Time Gross Settlement (RTGS) service. Key Highlights 🔹 A Vision for Seamless Payments The Bank’s roadmap is set to modernize the RTGS service, ensuring it remains a cornerstone of the UK’s financial infrastructure while adapting to the evolving needs of the economy and embracing innovation. 🔹 Enhanced Resilience and Efficiency The updated RTGS will deliver enhanced resilience, efficiency, and reliability, supporting the UK’s position as a global financial leader. 🔹 Driving Cross-Border Interoperability Cleland emphasized the importance of aligning with international standards to support cross-border interoperability, reducing frictions and enhancing global financial connectivity. 🔹 Supporting Innovation The Bank is exploring how RTGS can enable innovation, including facilitating the development of programmable money, digital currencies, and more sophisticated settlement mechanisms. 🔹 Engagement with Stakeholders Collaboration with industry participants and stakeholders remains central to this transformation, ensuring the updated RTGS meets the diverse needs of the financial ecosystem. 🔹Looking Ahead As the backbone of the UK’s payment systems, the renewed RTGS service will underpin the continued evolution of payments, fostering trust, resilience, and innovation in the financial sector. https://lnkd.in/dAv-2N9H #RTGS #PaymentsInnovation #DigitalEconomy #BankOfEngland #FinTech #CrossBorderPayments

Insights on Payments Innovation from the Bank of England The Bank of England’s newly released discussion paper underscores a critical juncture in the evolution of payment systems, emphasizing the necessity of embracing #tokenisation and other digital technologies to maintain a robust, dynamic economy. Axiology is at the forefront of this transformation, aligning tightly with the Bank’s vision by integrating advanced tokenisation technologies to enhance capital markets efficiency. Our efforts are geared towards revolutionizing traditional securities transaction processes to support economic growth and stability. With an approach that spans both retail and wholesale systems, upgrades to the Real-Time Gross Settlement (RTGS) systems are underway, and explorations into wholesale central bank digital currencies (wCBDC) promise a sophisticated future for financial transactions. Our participation in #digital #euro testing provides valuable insights with regards to technological choices in wCBDC settlement. We look forward to the launch of digital securities #sandbox and more clarity on wCBDC in UK. 📘 Read the complete discussion paper here: https://lnkd.in/dajY4RQM #BankOfEngland #FinancialInnovation #Axiology #tokenization #DigitalCurrency

🌊🚅🌆As I wend my way to the Nest Insight Conference I wanted to share some thoughts on potential deposit taker orientated drivers of the UK savings gap: ⚖️🫰Short Term Retail Money is Expensive - Most savers, particularly first time savers value easy access accounts - but short term retail cash is relatively expensive for banks to hold - because they need to be able to facilitate withdrawals at any time: https://lnkd.in/etiPWMbp 👮♂️KYC/AML is Expensive - and often uneconomical for small balances - we should all be pushing for a broader KYC reliance regime and the implementation of digital identities (the legislative framework exists in the form of the Digital Identity Bill) which would dramatically drive down these costs https://lnkd.in/eE_bDxen 💽 Cost to Serve is High - 10 years of very low rates has lead to a lack of investment in cash savings infrastructure (or as banks call it - the liabilities side of the balance sheet) which means that the cost of serving retail savings customers is generally high and the quality of technology is typically low. 🚚 Cost of Acquisition is High - typically non high street banks pay significantly more for retail customers than high street banks (by offering better interest rates) they mostly all still launch products by emailing the same distribution list and marketing in the same best buy channels, churn is typically high (80% +) and therefore banks prefer to target customers with larger deposits. 💡What's the solution? 👉 reduce onboarding costs with a broader KYC reliance regime and digital identities 👉 reduce cost of acquisition with better distribution outside of the standard best buys e.g. via #payrollsavings and #savenowbuylater 👉 reduce cost to serve with investment in cash savings infrastructure technology 👉 urgently redesign the rather unethical Government Help to Save scheme so that it targets and rewards irregular and first time savers https://lnkd.in/eySzDp_c What have I missed?

Happy Birthday #EuropeanBankingUnion! At ten years old, it strengthens our banking system, but is not yet complete. Bocconi researcher Brunella Bruno, featured in the accompanying picture, delves into this topic. First we must go back to the years that preceded the big bang of 2014. In those years, the vulnerabilities of some eurozone countries clearly emerged. In these situations, the wider the spread, the lower is the price of treasuries issued by “weak" countries was. This created a vicious circle, known as a bank-sovereign vicious loop, raising crucial questions: if the banking system of a member country falls into crisis, what will the repercussions for the Monetary Union be? What entity should support a banking system in difficulty without resorting to taxpayers' money? The European Banking Union aimed to be an answer, featuring three pillars. The first pillar is the Single Supervisory Mechanism (#SSM), that brings the European Central Bank (#ECB) together with national authorities to oversee the most significant banks in the euro area and some non-euro EU countries. The SSM ensures these banks are well-capitalized, stable and compliant with strict regulatory standards. While this system covers over 80% of the euro area’s banking assets, smaller banks are still supervised by national authorities, under the broader coordination of the ECB. The second pillar – the Single Resolution Mechanism (#SRM) – is designed to manage the orderly resolution of failing banks, minimizing the impact on the economy and public finances. While the SSM has proven effective in strengthening the banking system, it is still a work in progress, as it has not yet fully developed the mechanisms to resolve crises without resorting to taxpayer bailouts, as seen in past banking failures. The third pillar – the European Deposit Insurance Scheme (#EDIS) – remains incomplete. This scheme would provide a common level of deposit protection across the euro area, ensuring that depositors' confidence in banks is not influenced by their location. However, progress has stalled due to disagreements on how to share the financial burden among countries with different fiscal health. Despite this delay, the overall strengthening of the banking system under the first two pillars has reduced the likelihood and severity of banking crises, which may ultimately lessen the need for the full implementation of EDIS. While the European Banking Union has made significant progress in terms of banking supervision and crisis management, the third pillar of deposit insurance remains unfinished, and its implementation faces political and financial challenges. However, the overall stability of the banking sector has improved, reducing the risks that originally motivated the creation of the Banking Union.