Bank of England spearheads UK's next-generation retail payments design

Sarah Breeden, Deputy Governor for Financial Stability at the Bank of England, outlined the central bank's leadership in designing the UK's next-generation retail payments infrastructure. The initiative aims to boost competition, enable new digital forms of money, and deliver faster, cheaper, and more resilient payment methods.

Three pillars for future UK payments

The UK authorities, through the Payments Vision Delivery Committee, have established a new institutional model to deliver the next generation of retail payments infrastructure.

The Bank of England leads the design phase, translating strategy into a concrete framework.

"Money and payments are at the heart of the Bank's monetary and financial stability role," Breeden stated, underscoring the central bank's commitment.

This work is overseen by the Retail Payments Infrastructure Board (RPIB), comprising banks, fintechs, and merchants.

A new industry-led Delivery Company will then procure and build the infrastructure.

This comprehensive approach aims to deliver three key enhancements: enabling direct account-to-account payments in-store and online, facilitating the seamless exchange of traditional and tokenised money, and improving the speed and cost-efficiency of cross-border retail payments.

Beyond cards: International and digital frontiers

The UK's retail payments have seen improvements, notably with the 2008 launch of Faster Payments.

However, international systems like India's UPI and Brazil's Pix now offer direct account-to-account payments, a functionality the UK seeks to emulate.

Technologically, tokenisation and distributed ledger technology are opening new avenues for customisable and automated payments, essential for a digital economy.

The Bank of England aims for a "multi-money" ecosystem, allowing seamless exchange between traditional and tokenised bank deposits, systemic stablecoins, and potentially a digital pound.

This interoperability, settling safely in central bank money via RTGS, is crucial for competition and innovation.

A necessary leap for digital finance

The speech outlines a comprehensive and forward-looking strategy that addresses critical gaps in the UK's payment landscape.

While ambitious, the focus on interoperability and central bank money settlement is key to ensuring stability amidst rapid innovation.

Success hinges on effective collaboration between authorities and industry to deliver these complex changes without stifling private sector creativity.