Mark Taylor
Senior Editorial Manager
The UK’s flagship payments industry event drew its largest ever crowd to the ExCel London, with CUBE amongst the great and good discussing hot topics like open banking, data management, and how AI is transforming a sector already moving at light speed.
Here are our main takeaways from Pay360 2024:
There are more eyes on the sector than ever
With more than 4,000 attendees and hundreds of exhibitors, it is clear there has never been a busier time to be in payment services.
And all that buzz is creating new opportunities, challenges and risks.
Players of all shapes and sizes are juggling competing priorities, legacy infrastructure and complex regulations against a backdrop of geopolitics, tumultuous economic landscapes, and evolving customer expectations.
Sam Emory, Director of Payments Industry and Development at Lloyd’s Banking Group noted all of the above in a keynote speech, arguing that the UK payments industry faces a particularly unique set of challenges in corralling all the goings on.
As CUBE’s playbook for payments industry compliance professionals makes explicit, the fast-moving sector is experiencing a true evolution as the traditional systems built generations ago to facilitate transactions are creaking under the strain of digital commerce growth and evolving consumer expectations.
Emory noted that the UK focus is on delivering a core payments platform capable of handling these changes, and that industry would have a significant role in shaping the legislative framework.
This will involve embracing new data standards, creating new operating models, and establishing multilateral agreements for fair access to financial services, he said.
There is a busy road ahead, and it will play out in the public domain with no room for error.
“Collaboration with regulators and the government offers hope for progress”, Emory added.
Open banking is at a crossroads
One of the liveliest panels of the event involved a discussion around the UK’s plans for open banking.
Despite blazing a trail in enabling the sharing of customer bank transaction data outside of the incumbent high street lenders, industry experts fear progress may have stalled.
The emergence of new tools along with greater means of connectivity and data transfers offer another dimension to the sharing of financial information, but banks and fintech firms have been cautious over adoption.
Variable Recurring Payments (VRPs), for example, are a feature of open banking that allows customers to connect authorised payments providers to their bank accounts, which can then make payments on their behalf.
Although they present more control and transparency than the likes of direct debits, VPR uptake has been slow in the UK, said PSR senior policy manager Andrew Self. He said various players in the UK financial services landscape couldn’t agree on matters such as who is liable in the case of fraud.
“We do need a dispute model however,” he said. “We’ve told the industry to get on with these frameworks quickly by the end of the year I hope we can set out the next Phase 2 era in July 2024.”
Nationwide CEO, Joe Garner also outlined the “difficult birth” that open banking has experienced as it seeks to continue expansion into the mainstream.
Regulators are also yet to agree on who will take over in driving open banking forward in the UK, despite being one of the global trendsetters; the US is currently making tentative steps through its financial protection watchdog, but innovators in that jurisdiction could quickly catch up.
Further regulation is inevitable
The priorities of the UK Payment Systems Regulator (PSR) were outlined by its managing director, Chris Hemsley, who said improvements to the delivery of the payment systems would come with a new set of rules for participants to follow.
Hemsley said the desire for seamless and secure payments experiences for customers would have to come with advanced fraud detection measures, legal changes to protect customer money and data, and clear procedures for reporting issues.
“The openness that is built into our interbank systems is a real strength,” he said. “Markets and competition are powerful forces that we rely on to deliver innovation.
“But markets are institutions – they depend on agreeing on the rules of the game. Effective rules are needed to provide fair competition and unlock market investment and innovation. Payment markets need regulation to make them work well,” he said.
Some experts are pushing back, however, with Matthijs Boon, Group Chief Operating Officer of Equals Money noting on one panel that businesses were afraid of the increasing amount of red tape around payments.
“The volume of ongoing and upcoming regulations is a strain on industry resources,” he said.
Data management is a priority for regulator and regulated
Conservative MP John Penrose, a former risk manager at JPMorgan, labelled new data legislation in the UK as “one bill to rule them all”.
The incoming Data Protection and Digital Information (DPDI) Bill is effectively the UK’s first major post-Brexit stab at remodelling the General Data Protection Regulation (GDPR) for domestic use.
It covers various elements of data processing and storage, along with rules for analyses, application and how data is assessed.
Penrose said the bill should cement the UK’s position as a leader in payments innovation and will deliver “new commercial frontiers” for how technologies.
He also said the bill may mandate the creation of a new standards body, which could have ramifications for the Information Commissioner’s Office, which currently acts as the UK’s data regulator.
Regulators also believe addressing data transfer issues can help bring down soaring levels of fraud, to which some industry experts agreed, however the extent to which this can be achieved through legislation is up for debate.
“Part of the reason fraud comes in is the lack of parity of data between two parties,” said Tulsi Narayan, SVP of security solutions and processing at Mastercard. “When we see better quality data being transmitted from the merchant to the issuer, you can enable better scoring that the issuers can use to decide whether to step up or not.”
AI is a compliance game-changer
From the constant chatter on the conference floor to the constant stream of traffic at the CUBE stand, the topic of AI and how it can enhance operations was on everyone’s lips.
The speed at which the industry is moving, changing and adapting to consumer demand is prompting regulators to introduce rules on a scale not experienced in payments.
Unlike traditional financial services and connected industries such as wealth management and insurance, payments moves at a ferocious rate due to a perfect storm of insatiable consumer demand, ever-quickening technological developments, and the enormous revenue streams on offer.
As a result, the administrative and compliance burden around matters such as anti-money laundering and Know Your Customer controls is prompting businesses to find new ways to manage regulatory change.
The sheer volume and complexity of payment industry regulations has forced many players across the Rubicon, where they are adopting AI and machine learning tools to tackle manual processes that are resource killers and particularly prone to human error.
Intelligent tools are helping innovative payment firms like Revolut scale, whilst adapting to regulatory change, and compliance, easier, integrating automated speed, efficiency, and accuracy, and reducing the potential for costly compliance penalties.
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Visit the CUBE payments hub on our website, and download our free playbook; Four steps to navigate the coming storm in payments regulation.
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CUBE’s RegPlatform solution was created specifically to deal with the regulatory challenges and complexities fast growing businesses encounter.
Powered by AI, and tailored to individual business profiles and compliance frameworks, CUBE is helping payments firms around the world manage their regulatory change journeys from end to end, integrating powerful regulatory assurance and horizon scanning, protecting customers, and making stronger business decisions.
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