Today, tapping cards, using smartphones, or making transfers via banking apps is second nature to most people. However, even with these advancements, there’s always room for improvement, particularly in areas like speed, accessibility, and settlement efficiency.

This was a key focus during the launch event for the Regulated Liability Network (RLN) Experimentation Phase reports on 17 September, hosted by UK Finance, in partnership with EY. This event brought together over one hundred innovators and fintech firms, regulators, together with UK RLN participants including Barclays, Citi, HSBC, Lloyds Banking Group, Mastercard, Nationwide, NatWest, Santander, Standard Chartered, Virgin Money, Visa, and partners from EY, Linklaters, R3, Quant, Coadjute and DXC Technology. It attracted more than 130 firms from a range of FinTechs, BigTechs, and other innovative companies. The day was filled with enriching panels and discussions.

The day featured insightful keynote speeches from Bob Wigley, Chair of UK Finance, Victoria Cleland, Executive Director for Payments at the Bank of England, and William Chalmers, Chief Financial Officer at Lloyds Banking Group.

Driving payment innovation

The Bank of England has long called for greater innovation in payments, particularly as countries worldwide experiment with new payment methods. As we move deeper into a digital economy, it’s essential that the UK’s financial system does not lag behind. We must ensure that money evolves alongside technology, and one of the most exciting prospects for the future of payments lies in tokenisation – a process where assets are represented on a blockchain or distributed ledger. Tokenisation offers a multitude of benefits, from enhancing security and traceability to enabling instant transactions without compromising the value of the underlying asset.

The RLN initiative aligns well with these objectives, offering a platform where different forms of digital money can interact and settle transactions efficiently. This concept of a ‘platform for innovation’ is vital as the UK navigates the future of payments, ensuring that our financial infrastructure is prepared for the digital age.

The Regulated Liability Network – unlocking innovation

Since the beginning of 2024, UK Finance and RLN participants have been working on a detailed experiment around the concept of an RLN. This initiative seeks to bridge the gap between private innovation and regulatory frameworks, ensuring that any advances in payment technology are consistent with the principles that underpin the ‘singleness of money’– the idea that money should maintain a consistent value across different forms.

The Experimentation Phase delved into three key areas: business, technology, and legal frameworks. The findings highlighted how tokenised deposits, operating within the current legal and regulatory structures of the UK, can provide a next step in the evolution of commercial bank money. Crucially, this phase demonstrated that an RLN could deliver significant benefits in real-world applications, including potentially reducing payment fraud and streamlining complex transactions, such as property purchases.

For example, in combatting authorised push payment fraud – where victims are tricked into sending money to fraudsters – a platform for innovation could introduce smart contracts that lock funds and only release them when the agreed conditions are met, such as the receipt of goods or services. Similarly, in property transactions, a platform for innovation could facilitate the simultaneous execution of multiple actions, including mortgage drawdown, transfer of deposits, and payment of stamp duty, all through automated and secure processes.

Collaborating across industry

The success of the RLN Experimentation Phase is a true reflection of the strength found in collaboration across the financial services industry. As noted during the event, the collective effort of UK Finance members and innovators has been instrumental in redefining payment innovation. Our work has shown that there is significant potential for tokenised regulated money and assets to coexist on a shared ledger, offering enhanced efficiency, security, and user experience.

With the current Experimentation Phase coming to an end, the focus turns to the next steps. The RLN platform for innovation represents an opportunity for both the public and private sectors to work together in shaping the future of payments in the UK. A collaborative approach between industry, government, and regulators is essential to create a unified vision for payment innovation that can deliver real economic value and growth.

Next steps: The RLN hackathon

As we look into the future, one immediate next step of the RLN journey is to continue fostering innovation through collaboration. One of the most exciting upcoming initiatives is the RLN hackathon, a two-day event from 20-21 November 2024, designed to bring together innovators, fintech firms and members of the wider financial services ecosystem.

The hackathon aims to promote innovation in payments, explore potential use cases, and obtain feedback on the ‘platform for innovation’. More information will be made available soon about registering.

The success of the RLN depends on the continued collaboration of industry and innovators, as well as a shared commitment to driving payments innovation in the UK. There is still much more to explore, but with the insights gathered from the Experimentation Phase, we’re confident that the RLN can deliver real economic value and transform the payments landscape in the UK.

To watch the event in full and access the RLN reports and our findings, visit UK Finance RLN Reports 2024 here.