‘Access is life-changing – we’re denying access to payments accounts to those we should support’

We were first with real-time clear­ing of pay­ments with Faster Pay­ments, near-ubiq­ui­tous con­tact­less pay­ments nation­wide and a 21^st-cen­tu­ry pay­ment sys­tems strat­e­gy involv­ing the whole com­mu­ni­ty.

But if you are unem­ployed due to sick­ness for exam­ple, you can’t open a bank account eas­i­ly. If you’re one of the 500,000 UK star­tups that set up each year, where the entre­pre­neur may not have fund­ing yet, access­ing bank­ing ser­vices is near impos­si­ble.

And if you’re a reg­u­lat­ed pay­ments com­pa­ny launch­ing a new ser­vice for small and medi­um-sized enter­pris­es (SMEs), you can’t open an account to hold client funds eas­i­ly via any major UK bank.

Because while the UK has a sup­port­ive reg­u­la­tor, out­stand­ing paytech tal­ent and risk-friend­ly investors, world-class pay­ments is not acces­si­ble to three main con­stituents.

First­ly, it’s shock­ing that many con­sumers don’t have access to finan­cial ser­vices to make their lives bet­ter. Banks are clos­ing branch­es nation­wide. The Finan­cial Inclu­sion Com­mit­tee dis­cov­ered that the annu­al pover­ty pre­mi­um paid by those who are finan­cial­ly exclud­ed is £1,300. Over a life­time of 80 years, that’s more than a £100,000 penal­ty for being poor. And the Finan­cial Inclu­sion Mon­i­tor­ing Report 2015 high­light­ed that 1.5 mil­lion adults in the UK don’t have a bank account.

Sec­ond­ly, the UK’s five mil­lion SMEs are not able to access the lat­est tech­nol­o­gy, often because they don’t know an alter­na­tive is avail­able or because the banks do not allow access.

Final­ly, there are flaws in the tra­di­tion­al sys­tem. Despite being reg­u­lat­ed enti­ties, for exam­ple, most pay­ments com­pa­nies must do their bank­ing with anoth­er bank. The oth­er bank is not set up to do this flex­i­bly or cheap­ly and is often com­pet­ing direct­ly. This chan­nel con­flict isn’t con­ducive to a mutu­al­ly ben­e­fi­cial rela­tion­ship or to hav­ing the best prod­ucts designed to meet the needs of cus­tomers.

Many reg­u­lat­ed pay­ments com­pa­nies don’t fit with the risk pro­files of the big banks, so ser­vices are being with­drawn with lit­tle or no notice. This derisk­ing threat­ens com­pa­nies and coun­tries.

The UK’s fin­tech com­pa­nies can pro­vide the answers. But the banks tend not to know what to do with their solu­tions. The Revised Pay­ment Ser­vices Direc­tive or PSD2 is designed to force banks to adopt open bank­ing by allow­ing third par­ties access to cus­tomer data via secure appli­ca­tion pro­gram­ming inter­faces. It also sets out to reduce the influ­ence of the pay­ment schemes. How­ev­er, the leg­is­la­tion is in dan­ger of rein­forc­ing the dom­i­nant role banks play with con­sumers because they are still at the core of the trans­ac­tion.

The Emerg­ing Pay­ments Asso­ci­a­tion (EPA) is ded­i­cat­ed to over­com­ing access chal­lenges. We’ve already influ­enced the Bank of Eng­land to open its real-time gross set­tle­ment accounts to non-banks.

We’re also devel­op­ing a way for pay­ments firms to demon­strate they are finan­cial­ly inclu­sive, through an accred­i­ta­tion kitemark sup­port­ed by BACS.

We’ve lob­bied gov­ern­ment to appoint a min­is­ter for finan­cial inclu­sion. In July, MP Guy Opper­man was appoint­ed as the first min­is­ter for pen­sions and finan­cial inclu­sion. And we are export­ing our expe­ri­ence to parts of the world where finan­cial and eco­nom­ic exclu­sion is cur­rent­ly a mas­sive eco­nom­ic drag on soci­ety. Three new EPA com­mu­ni­ties, in Africa, East­ern Europe and Chi­na, are launch­ing short­ly. This will enable us to show lead­er­ship in mov­ing mon­ey effi­cient­ly for every­one.

But more needs to be done. We need to give con­sumers access to a quick-and-easy pay­ment sign-up process for all. Accounts should have jam-jar­ring and seg­re­ga­tion of funds, sim­ple and trans­par­ent fees, and low­er costs.

We need to give busi­ness­es access to flex­i­ble, cost-effec­tive pay­ment accounts that allow them to trade glob­al­ly, use cus­tomer data and remove the finan­cial man­age­ment bur­den. And we need to give reg­u­lat­ed pay­ments com­pa­nies access from banks that want to ser­vice them enthu­si­as­ti­cal­ly rather than reluc­tant­ly.

In tomorrow’s world of pay­ments, enabling access is every­thing. With the government’s sup­port and co-ordi­nat­ed action across the com­mu­ni­ty, the UK can lead the world.