the journey to best in class payments speech given by david bailey, executive director for financial market infrastructure, bank of england at the westminster business forum keynote seminar : the future for payments regulation in the uk – competition, innovation and end - user priorities 28 june 2018 i would like to thank rachel james, joanna bibby - scullion and philippa cohen for their contributions. all speeches are available online at www. bankofengland. co. uk / speeches good morning. i would first like to thank the westminster business forum for inviting me to speak at today ’ s seminar on the future for payments regulation in the uk. when i first spoke at the forum, three years ago, i highlighted the potential for considerable change in the payments industry in the uk. there was a sense that payments, a sometimes overlooked but vital sector of financial market infrastructure, was no longer going to be so quiet, and an unprecedented amount of innovation and change was on the horizon. consumer expectations around payments were evolving in response to the proliferation of mobile devices, smart phone technology and the ever - expanding range of services available through ‘ apps ’. contactless payment, using a card or mobile device, was becoming a daily reality for many. the term ‘ fintech ’ was entering the mainstream. regulatory change was also underway. the payment systems regulator was gearing up for launch with a mandate to promote innovation, competition and the interests of service - users. and at the bank of england, we had recently created a directorate dedicated to ensuring financial market infrastructure, including payment systems, meet the necessary standards of robustness and resilience. overall the pace of technical, structural and regulatory change in payments was poised to pick up. and i have not been disappointed with the level of ambition and innovation we have seen in the past three years. collectively, we have been on a journey ; inching and in some cases taking great strides towards a payments landscape that is competitive, resilient and ready for the future. but, while considerable progress has been made, the journey to best in class payments is far from complete. whilst important milestones have been reached, many more lie ahead. for example, one catalyst for change in uk retail payments was the creation of the payments strategy forum ( psf ) in march of 2015. and, with the formal consolidation of the bacs and faster payments systems into the new payment system operator ( npso ) just last month, we can say that a key recommendation of the psf has been

delivered. but the npso now needs to turn its attention to developing and implementing the remaining critical recommendations which i will come on to discuss. we now need, collectively, to refocus our energies for the next leg of this journey towards best in class payments. in line with this, today i would like to share how we at the bank of england are looking to the future to ensure our systemically important payment systems are robust and resilient, their underlying infrastructure is best in class, and our regulatory toolkit remains fit for purpose and future - proof. npso : a mandate to be greater than the sum of its parts payment systems, by their very nature, bring together participants that would otherwise transact bilaterally. crucially, by doing so, they promote increased efficiency and resiliency that is enjoyed by all. they manage all speeches are available online at www. bankofengland. co. uk / speeches risks, eliminate intermediate arrangements and related costs at the back - end of the payments value chain, and provide functionality that enables innovation to proliferate at the front - end. as described in our annual report this year, financial market infrastructure, including payment systems, exist to reduce the risks and costs involved when participants make payments. and this leads me to the npso and its creation. the psf, established by the payment systems regulator ( psr ) in march 2015, proposed the consolidation of the uk retail interbank payment system operators : bacs and faster payments, as well as the cheque and credit clearing company. the bank was engaged closely with the work of the forum and was supportive of this change as we could see the potential for the consolidated scheme to be greater than the sum of its constituent parts. the consolidated entity is expected to deliver a range of benefits, including : strategic leadership that is forward looking and proactive, with an enhanced ability to identify the challenges and risks of tomorrow and prepare for them today ; higher standards of governance and risk management, with an improved ability to leverage best practices across the schemes. as an example, a variety of access models have evolved in schemes over the years, and the npso is now in a great position to look across the schemes and consider which models deliver the best outcomes and risk management ; and the development and delivery of a best in class new payments architecture. the npso is also set up to be a leader in the field of retail payments. and the bank is now their counterpart in the uk wholesale payments