The recent election of Labour in the UK is likely to result in “major changes” to fintech and payments markets, according to an analysis shared by Juniper Research.
Juniper Research notes in a blog post that as industry watchers, they wanted to “examine the new government’s pledges and provide recommendations on what they should prioritize over the coming months and years.”
Juniper Research pointed out that this change “comes at an uncertain time for the industry.”
Across the technology sector, including fintech, funding has “been significantly depressed, with uncertain economic conditions creating difficulties for all types of businesses.”
Juniper Research added that there have “been reductions in start-up valuations and insolvencies, further creating uncertainty.”
There has also been uncertainty “within payment systems in the UK, and how they are regulated.”
Juniper Research also mentioned that the UK has “a complex regulatory framework composed of multiple regulators, such as the PSR (Payment Systems Regulator), the Bank of England, and others.”
According to Juniper Research, much of the future trajectory in payments “in the UK is dependent on government direction, with the Future of Payments Review, released in November 2023, calling for a National Payments Vision, which will provide a clear path for the development of payments within the UK.”
The Labour Party identified several key pledges for fintechs within its manifesto. These included the following:
- Streamlining the regulatory rulebook and strengthening international engagement in financial services
- Adopting a coordinated cross-sectoral approach to fraud prevention, including creating a national financial inclusion strategy, and regulating the Buy Now Pay Later sector. In fraud, specifically, Labour advocates making social media companies share the burden of fraud reimbursement
- Making the UK a global hub for green finance activity, delivering a world-leading green finance regulatory framework, and partnering with the financial services sector to support the decarbonisation of our homes
- Becoming a global standard-setter for the use of AI in financial services, delivering the next phase of Open Banking, defining a roadmap for Open Finance, embracing security tokenisation and a CBDC (Central Bank Digital Currency), and establishing a regulatory sandbox for financial products to reach underserved communities
Juniper Research explained that these pledges “contain a lot of potential improvements for the UK financial services and payments sector.”
However, Juniper Research clarified that “some pledges, such as evolving Open Banking and pursuing a CBDC are broad ambitions, rather than specific actions – requiring a more robust plan in the coming months that provides much-needed detail and certainty.”
To this end, Juniper Research have now “identified several recommendations that the new government could integrate into its new strategy.”
Cancelling Proposed ‘Slowdown’ of Suspected Fraudulent Faster Payments
This measure, which would see Faster Payments “being delayed by up to four days where fraud is suspected, is set to regress payments at a time where the priority should be to increase payments’ speed. While fraud is a major challenge, this is an extreme measure.”
Instead, Juniper Research say that they “recommend boosting secure data sharing between financial institutions to identify fraudsters, mule accounts, and synthetic identity use to a better degree.”
They would also recommend “targeting fraud and scams at the source – fraudulent activities through social media are a major risk, and social media companies should be enforced to do more to curb fraudulent adverts and activities on social media.”
The combination of these measures would work to reduce fraud in an efficient way.
Creating a Clear National Payments Vision That Prioritises A2A Payments
The UK is experiencing good innovation within Open Banking “in terms of both access to data and payments. However, the regulator needs to set out the future for Open Banking, and Open Finance.”
Juniper Research added that this needs “to include setting specific expected outcomes, such as expanding the scope of data access to all financial products. Within payments, Open Banking can be used to enable easier access to A2A (Account-to-Account) payments. This can unlock innovation, and reduce reliance on the card networks.”
Commercial VRPs (Variable Recurring Payments) should be “prioritized, as these can bring significant benefits across different use cases.”
Juniper Research further noted that “while CDBCs should be explored to ensure the UK retains its credentials as a financial services powerhouse, it should not be an urgent priority to deploy a system, rather taking the time to correctly assess a CBDC’s future role, likely in a wholesale capacity. By creating a cohesive strategy, the government can chart a course towards innovation.”
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