Dear Governor,

We write on behalf of the 8 UK stress tested banks and building society and UK Finance. Together with the Bank of England we share the objective of ensuring the UK remains at the technological frontier of safe and resilient payments innovation, supporting openness, trade and growth. In this context we welcome the Bank of England’s (“the Bank’s”) approach to innovation in money and payments Discussion Paper. 

A secure, efficient and innovative payments sector is at the core of economic success and growth. The UK has historically been a pioneer in payments innovation. However, we are now at risk of falling behind, as a result of a congested change programme with a range of competing priorities and mandatory regulatory initiatives and an environment that is inconsistent with long-term investment. 

Joe Garner’s Future of Payments Review report recognised a unique and valuable opportunity to re-establish a successful and world-leading UK payment’s strategy. Following from this, we welcome the Economic Secretary to the Treasury’s announcement that the Government will set out its ambition for the UK to be at the frontier of payments innovation through a National Payments Vision (NPV). We look forward to further engagement with both the Government and the Bank on this.

The Bank’s discussion paper demonstrates leadership and outlines the critical objectives and outcomes that must underpin the overall payments vision. In particular we agree that achieving a robust and dynamic UK payments strategy to serve business and consumers and hence the UK economy is a team sport involving players across government, authorities and business. We welcome the Bank’s initiative and agree that clear and renewed leadership by the UK authorities is required for the UK to remain at the forefront of payments innovation. 

We must work together, with a greater role for industry, to establish a clear prioritisation of objectives (including regulatory), consistent policies and a stable multi-year change agenda that can form the basis for planning for all parties. Investment in new payments infrastructure and services must be supported by “sustainable and coherent funding and revenue models” including rationalisation and simplification of infrastructure and regulation. With these sound foundations the private sector can invest confidently in our collective future. Together we can deliver continued resilience and payments innovation, including the necessary Faster Payments and Bacs renewal that can drive economic growth and serve the needs of consumers, businesses and society.

As a core part of the money and payments environment, we want to ensure that today’s money issued by commercial banks – with which the vast majority of retail payments are made in the UK – keeps pace with new technology, provides a platform for innovation (while preserving the role of the central bank), continues to minimise Financial Stability Risk and ensures strong customer protections. 

Innovation in money and payments (for example in the form of programmability and interoperable platforms for innovation) creates the capability to make payments with security, efficiency and speed. These developments could potentially be driven by a retail Central Bank Digital Currency (CBDC), or by private sector initiatives, as encouraged by the Bank. Such initiatives may have the potential to provide enhanced security and authentication for customers. We believe a private sector solution, resting on shared public-private objectives and priorities, could deliver significant benefits, while preserving the singleness of money as we have today, minimising financial stability risks and ensuring continued use of central bank reserves as the monetary anchor. 

In support of this view and payments innovation more generally, the findings from the industry’s recent experimentation with new money and payments technologies provide initial proof points against these objectives. The research also demonstrated the importance of understanding the economic implications, commercial justification and prioritisation of long-term infrastructure investment and decision-making, whether in new or existing initiatives. This directly impacts the economic sustainability of UK payments.

We are committed to ensuring the UK’s payments systems are successful and world leading. The Bank’s Discussion Paper identifies important requirements to achieve this aim. Success will require close coordination across the public and the private sectors to ensure business and consumer objectives are effectively and sustainably fulfilled. We look forward to working with the Bank, HM Treasury, other authorities and the broader industry to agree on a single vision for the future of UK payments. We then must begin the work of creating that future together.

Sincerely,