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From contactless cards to phone payments, almost everything we buy relies on just two major companies. Now the UK is considering a homegrown alternative.
We explain why change is being discussed, when it could happen and whether you need to prepare for it.
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Leading UK financial bodies met last week to discuss the future of our national payment systems.
The aim is to set up UK-grown alternative alternative to payment companies Mastercard and Visa. It comes amid growing concern in Europe that the effects could be catastrophic if access to those systems was turned off – as happened as part of the sanctions imposed on Russia by the US when it invaded Ukraine.
The government has established a Payments Vision Delivery Committee, which will “drive renewal of the UK’s retail payments infrastructure”, according to UK Finance, the trade association for the UK banking and financial services sector.
Any changes are a long way off, according to James Bore, a chartered security expert. “The current proposed timeline is five years, which I would describe as optimistic but not completely unrealistic.
“Most of setting up a payments system of this scale isn't about the technology (though that's enough of a hurdle in itself) but all of the rules, regulations, standards and agreements,” he tells us. “You need a sizeable number of banks on board, including central banks, you need retailers to adopt the scheme and you need to be able to scale up fast once you launch.”
There will be no change in the near future. If a new payment system is introduced, customers would experience little change. New debit and credit cards might need to be issue, and you’d need to update the card details you use for any regular payments.
The new system is expected to be paid for by major banks and other City organisations. So there won’t be a direct cost to consumers. But it’s likely that the new system would charge retailers a fee for handling each transaction (as Mastercard and Visa do currently). These costs ultimately get passed on to consumers.
A new system is supposed to improve security and offer competition in the sector, which the National Payments Vision (NPV) described as “the government’s ambitions for bolstering the UK’s payments sector to deliver economic growth”.
The UK’s Payment Systems Regulator reported that up to 95% of UK card transactions are made using payment systems owned by US firms Mastercard and Visa. So there’s a desire for more competition.
Some commentators have suggested a need to speed up the process for security reasons. Aurore Lalucq, chair of the European Parliament’s economic and monetary affairs committee, said: “Visa, Mastercard… Trump can cut everything off. The rest is poetry. I urgently request that the commission organise a European Airbus for payment systems: you can’t say you weren’t warned.”
Since 2022, Russia has been hit by the suspension of Mastercard and Visa services as a result of US sanctions. But it had already established its own domestic payments system, Mir, which has meant that domestic payments could continue.
Martina Weimert, chief executive of the European Payments Initiative (EPI), a consortium of 16 European banks and financial services companies, recently said: “We are highly dependent on international solutions…Yes, we have nice national assets like domestic [payment] card schemes…but we don’t have anything cross-border.
“If we say independence is so crucial and we all know it’s a timing issue… we need action urgently.”
In the EU, many member countries are reliant on Visa and Mastercard. The two companies accounted for around 63% of card transactions in the EU in 2022, according to the European Central Bank. In the nine EU countries where domestic schemes exist, they are declining in use.
The UK’s NPV was first published in October 2024, before Trump’s re-election, so is not directly motivated by it.
Bore thinks the move is to create safety and autonomy when it comes to us making digital payments. “It's more about ‘concentration risk’. If everyone relies on one system, then the impact if something does go wrong – and the attractiveness of the target for an attacker – is much higher than with a greater spread.
“On top of that, having the system under national control, instead of extranational, reduces the chances of a changing political landscape having negative effects on users.”
While this may be a concern, Bore doesn’t think a shut-off would occur because of a US government directive, but more likely because of technical issues.
Bore says: “Both Mastercard and Visa have previously had significant failures lasting hours. We've also had individual banks with failures, causing smaller scale but similar problems.”
If a failure does occur, here’s what could happen:
There’s not a lot we can or need to do to protect ourselves, but James does have one suggestion for us: “I do recommend that people keep some cash at home for these sorts of problems.
“Remember that we've never seen a technical issue lasting more than a few hours, so plan accordingly. Keeping thousands of pounds at home in cash carries its own risks.”
Last week's meeting was chaired by Barclays UK chief executive Vim Maru. The Retail Payments Infrastructure Board and Delivery Company are chaired by the Bank of England. It includes banks and building societies, such as Nationwide, Santander and NatWest, merchants and fintechs, as well as Pay.UK (the body that runs the UK’s payment systems) and the Payment Systems Regulator (PSR).
These organisations will cover the costs of a new payments company. Representatives from Mastercard and Visa are also involved in the discussions.
A spokesperson for Santander told us: “Santander is working alongside its peers to deliver an industry-wide strategy to shape the future of the UK’s payments ecosystem, in line with the government’s National Payments Vision (NPV).”
Visa and Mastercard have said they welcome the competition and remain committed to the UK market.
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