Paul Staples: Hello and welcome to our new episode of Risk and Regulation Unravelled, Grant Thornton’s Financial Services podcast. Every month or two, we bring you conversations about the dynamic world of risk and regulation. At Grant Thornton, we help our clients understand new developments, upcoming changes, and how to stay ahead of the curve by inviting great experts and knowledgeable individuals to share their insights.
Today, we’re taking a rapid look at some of the key trends and challenges facing the payments industry—a dynamic ecosystem with fast-moving businesses, disruptive technologies, established players, and new entrants. Alongside all this innovation, there are significant regulatory challenges for firms to navigate.
I’m pleased to welcome Robert Courtneidge, Policy Advisor from The Payments Association, as well as my colleagues Paul Olukoya and Alison Kopra. Hello everyone!
Let’s set the scene. Last November, the UK Government set out its national payments vision, aiming to create a resilient, inclusive, and innovative payments ecosystem. The focus is on next-generation technology to meet the needs of consumers and businesses, supporting economic growth with an effective payments infrastructure.
Open banking is a key example, with the government promoting a viable commercial model to encourage competition and innovation. But for the industry to thrive, effective and proportionate regulatory guardrails are needed. For instance, strong customer authentication has made payments safer, but some in the industry feel requirements are overly burdensome. Proportionality is key.
Financial crime and fraud prevention are also major concerns, with advanced technologies like AI and enhanced data sharing being introduced to detect and prevent fraud more effectively.
Let’s start with Robert. Robert, what are your views on the innovative areas of the industry, particularly new forms of digital money and assets like stablecoins? How is the UK moving forward compared to the US?
Robert Courtneidge: Thanks, Paul. Stablecoins are probably the most talked-about topic in payments right now. Every day, there’s a new white paper or industry commentary, and major players are entering the market. The global stablecoin market is accelerating, partly due to US policy moves to counter China’s push for CBDCs. The US has made it easier to issue commercial stablecoins backed by US Treasury bonds, while Europe is moving forward with regulation and Singapore is also active.
In the UK, we have enabling legislation but need pilots and clear regulation. There’s currently only one GBP stablecoin, and the regulatory framework is fragmented. The Bank of England and FCA are set to regulate systemic and non-systemic stablecoins, but there’s no clear guidance on when a token becomes systemic. This uncertainty makes it hard for businesses to invest in the UK.
We want firms to be able to issue GBP-based stablecoins, but if they become systemic, all funds must be held at the Bank of England without interest, which is unattractive for commercial issuers. The UK has the expertise and institutions to lead in digital money, but we need proportional regulation and clarity to unlock innovation and investment.
We’re urging the government, the Chancellor, HM Treasury, and the FCA to deliver on this.
Paul Staples: Thank you, Robert. Regulatory clarity is essential for industry confidence. Let’s pivot to another topic: the managed mandatory reimbursement mechanism for APP fraud. Despite developments, some customers report inconsistent outcomes. Robert, what changes are still needed?
Robert Courtneidge: APP fraud remains a major challenge. The new reimbursement rules have helped protect customers, and most claims are now paid out quickly. However, the way claims are handled is inconsistent, with many firms relying on manual processes or systems that aren’t fit for purpose. The pay.uk infrastructure isn’t fully ready, so most banks still use UK Finance’s technology, which is flexible and reliable.
The RCMS system, meant to handle these cases, is clunky and expensive to onboard. Until pay.uk proves RCMS can outperform the UK Finance system, we need to stick with what works. The industry needs a central system that everyone follows, but for now, UK Finance’s system is still in use.
Paul Staples:
Alison, as a financial crime specialist, what’s your perspective?
Alison Kopra: I agree with Robert, especially about RCMS. The new reporting standards will eventually provide rich data for regulators, but until all firms are on a functional system, we’re in a halfway house. There are inconsistencies due to lack of clarity, especially around the consumer standard of caution, which allows for discretion. Firms are making their own decisions about when to deny claims, and more examples of good and poor practice would help.
The upcoming independent review will hopefully address these issues, including confirmation of payee and the ability to delay payments where fraud is suspected. The reimbursement regime was always designed as a stick to incentivise firms to improve fraud controls, but it only applies to payments firms, not other players in the fraud ecosystem.
Robert Courtneidge: Bringing in other players, like big tech, has been difficult. Financial institutions end up bearing the burden of reimbursement, even though they’re not always the instigators. The card industry has chargeback processes built over decades, but faster payments and peer-to-peer transfers lack this heritage. We need a proper framework and a new entity to oversee orchestration and provide clarity.
Paul Staples: Paul, what are your observations around compliance and innovation, especially since PSD2 went live?
Paul Olukoya: Open banking has been a real success in the UK, with one in five people and small businesses now using it. Innovative products and platforms have thrived, but challenges remain, especially around consumer protection. Cards offer chargebacks, but pay by bank doesn’t have comparable mechanisms yet. API fragmentation and performance are also issues, particularly for smaller firms.
The next steps—PSD3 and open finance—are exciting, moving beyond payments to cover the whole financial life of a customer. The UK needs to keep evolving and address these challenges.
Robert Courtneidge: Open banking is moving in the right direction, but we need the UK’s version of PSD3 soon. Europe is moving forward, and the UK must keep pace. A proper categorisation of regulated industry types would help, allowing firms to move up or down as needed without unnecessary red tape.
Paul Staples: Let’s move to safeguarding, a key area for regulators. Robert, what’s your view on the recent policy statement and consultation process?
Robert Courtneidge: The consultation process was a success, with the FCA and HM Treasury listening to industry feedback. The interim rules in policy statement 2512 make sense and give firms time to update their safeguarding policies before they take effect in May 2026. The reforms aim to deliver faster, safer protection of customer funds while keeping the sector dynamic and competitive. Proportional, risk-based rules are needed to avoid excessive costs for smaller firms.
Paul Staples: Thank you, Robert. It’s great to see regulators being pragmatic and supporting growth with a proportional regime. That may pave the way for future consultations.
Paul Staples: There’s so much to cover in the industry, but we’re out of time. My key takeaway is the need for regulatory clarity to give businesses confidence to invest and move forward. The UK leads globally in many areas, but operational and ecosystem challenges remain. Let’s learn from good practice and be confident going forward.
Thank you to all my guests and to our listeners for joining Risk and Regulation Unravelled. If you enjoyed this episode, please subscribe on your preferred platform to stay up to date with future episodes.
