The Financial Conduct Authority (FCA) in the UK has initiated steps to eliminate the £100 cap on contactless payments, a change expected to benefit both businesses and consumers by providing greater flexibility in transactions. This decision comes on the heels of the successful adoption of digital wallets that utilize biometric logins, which currently circumvent the existing limit. The FCA’s approach is also drawing inspiration from practices observed in the United States.
Beyond the contactless payment changes, there is a strong emphasis on open finance reforms, particularly aimed at enhancing financing options for small and medium enterprises (SMEs). The FCA intends to give priority to lending for SMEs, leveraging new powers anticipated from forthcoming legislative changes concerning data usage and access. Additionally, plans are underway to introduce variable recurring payments within the framework of open banking initiatives.
Shifting its focus to digital finance, the FCA is adopting a digital-first strategy and has appointed a new executive director to supervise payments and digital finance, who will also oversee the Payment Systems Regulator. Existing reforms in various sectors, including securities settlements, digital asset management, and pensions, are set to progress alongside these developments.
A key part of the FCA’s agenda includes recommending governmental action in three critical domains: the enhancement of digital identity verification, improvements to the Companies House database, and digitization of court systems to minimize delays and streamline processes.
In light of the fast-paced evolution of the payments sector, UK regulators are also revamping their collaborative efforts. A recent review conducted by major regulatory bodies, including the Bank of England, the Prudential Regulation Authority, and the Payment Systems Regulator, assessed their Memorandum of Understanding (MoU). The review’s objective was to align regulatory oversight and innovation with the government’s National Payments Vision.
The annual review, mandated by the Financial Services Banking Reform Act 2013, has illuminated the significant strides made in data sharing and professional exchanges. However, regulatory leaders acknowledged the necessity for deeper integration and cooperation, with plans to refresh the MoU by mid-2025. The National Payments Vision, published in late 2024, outlines the priorities for advancing payment systems while focusing on aspects such as innovation, resilience, and inclusivity.
In summary, the FCA is unveiling significant changes that not only target the removal of payment limits but also promote a digital-first approach and support for SMEs. These efforts demonstrate a concerted push towards a more flexible, innovative, and inclusive financial landscape in the UK.