Hammond announces major payments review

Philip Hammond has announced a Treasury-led review of the UK’s evolving payments landscape.

The chancellor used what is likely to be his last Mansion House speech last night to announce an industry-wide examination of the impact of technology and changing regulation on the UK’s financial services sector, as the country prepares to leave the EU.

Referencing the rising number of digital payments firms that have sprung up as consumer habits shift online, Hammond said the review would bring together “policymakers and regulators to make sure that our regulation and infrastructure keeps pace with the dizzying array of new payments models”.

The chancellor warned that in order for the UK to retain its status as a leading financial services centre, its model “must evolve and adapt to a changing world”.

He also warned that the next prime minister would need to complete the post-crash recovery process which had been put in place by previous governments, and urged the banking industry not to allow reform and innovation in financial services to be “overshadowed by Brexit”.

“London’s position as the premier global financial services hub depends on our ability to capture a share of these booming markets,” he said. “And it depends, too, on our ability to integrate the technologies of the future into our mainstream financial services.

Hammond added: “In short, to remain a dominant player we in the UK must do what London’s markets have always done: evolve. Refuse to stand still; reject the notion of the status quo; embrace change, disruption and challenge. Adopt, adapt and synergise enthusiastically and energetically. Radiate the energy and dynamism which distinguishes a real hub of innovation from its sterile imitators.”

Hammond added that as the first wave of FinTech innovation matures, with the likes of challenger banks such as Monzo and Starling and payments giants such as Klarna and PayPal becoming more established, it was incumbent on the industry to “evolve our policy and regulation too, to make sure it remains fit for purpose”.

He said the Treasury would collaborate with the Financial Conduct Authority to use the government’s Smart Data Function in order to build upon the progress made by Open Banking, with a new agenda for Open Finance, in order to give small businesses and consumers “power over all of their financial data, so that SMEs will have access to financial tools hitherto only accessible to larger corporates”.

The chancellor said he had heard calls from business for greater “air traffic control” to "manage the cumulative impact of regulatory change emanating from different sources."

As a result, as the UK awaits resolution to the Brexit process, Hammond said the first phase of the financial services review would involve coordination between the regulatory authorities, starting with a summit of regulators to be held at Number 11 Downing Street in a few week's time, with call for evidence to be issued by the Treasury before the summer.

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