Most notably, the decline in the use of cash has accelerated, with fewer shops accepting only electronic means of payment and even more commerce taking place online. This will however have ramifications for the unbanked who rely on paper money as their only method of transacting.

New products and services can be expected to emerge in the months and years ahead to respond to these trends, which speakers at PayExpo offered their insight on.

As is the age-old dilemma, with new products comes new regulatory qualms. The challenge regulators must tackle is how to align this mandate to protect alongside the rich opportunities and ideas which have been ignited by Covid-19.

Covid bringing new urgency to innovation

Ritesh Jain, former global head of digital technology at HSBC, believes the pandemic has shone “a significant spotlight” onto the unbanked population, stating that he is currently working on an initiative with G20’s financial inclusion programme to address this.

“We definitely need significant initiatives on how we can serve underbanked people,” Jain says.

“In the past, we have always seen fintechs working in this space, but they alone cannot fulfil the gap because we need significant improvements from a regulatory and compliance perspective.”

He cites some of the work in India in recent years to bring its banked population to around 80%, thanks to projects such as the Unified Payment Interface, and believes this is something that will be replicated elsewhere in the years ahead.

Speaking in the same session Jason Maude, head of technology at Starling, describes how the pandemic had brought “a new urgency and a new meaning” to certain products that the bank was already working on.

One of these is the ‘Connected card’, which launched in early April. This is a spare debit card that customers who were self-isolating could give to a family member, friend or neighbour to do shopping and other essential tasks on their behalf.

“We don’t really have ‘product timelines’ at Starling, so we’re not sitting there saying, ‘We have to deliver this in Q3 or Q4’,” Maude says.

“We have products that we’re working towards developing, but we’re flexible enough in both our technology and management structure to say, ‘Hey, let’s just put that aside for a while and focus on his because this has suddenly become more important’.”

While these products and services are designed to and will likely be of great benefit to the end consumer - particularly the underbanked - without the infrastructure or regulations in place to oversee the delivery of these services, it may prove challenging to bolster consumer confidence and uptake.

What’s more, without concerted input and support by regulatory bodies, fintechs themselves may not feel as comfortable to innovate and allocate resource to areas which may not prove viable for regulatory reasons in the long term.

Proactive vs Reactive

Comprehensive regulatory bodies are vital for consumer protection and it is often said that operating within the parameters dictated by, say, the FCA, gives UK based firms a strong reputational seal of approval. However, ensuring that such regulators are able to find the right balance between consumer protection and fostering innovation is no simple task.

Bodies such as the Payment Systems Regulator (PSR) appreciate this and are (at least publicly) refining their strategy and objectives to try and satisfy these two opposing forces.

Diving-in to a brief fireside chat that circled the UK’s PSR 2020 outlook, Steven Bisoffi, payments technical specialist, PSR, joined David Parker, founder and CEO, Polymath Consulting.

Bisoffi explained that PSR exposed the gap which has existed for a long time in terms of payment systems - looking to drive innovation and competition with a specific interest on end-user needs across those payment systems.

“Up until recently, we [the PSR] have been relatively reactive. However, over the last 12 months and looking forward we’re going to have to be both reactive and proactive.”

He explained that as announced in the PSR 2020-2021 strategy, the body is looking into the market and identifying where it can make a difference. One of the key areas of this strategy is the new payments architecture.

Alongside this key focus lies the importance of access to cash and boosting this in line with innovation: “We’re working closely with the likes of the FCA on this as well, to push forward and ensure that there are reasonable steps being taken to allow for the population and consumers that require cash to be able to.”

Bisoffi also mentioned the work the PSR has carried out across the card acquiring market, authorised push payment fraud, confirmation of payee success and exploring PSP journeys into the future.

“This comes back to the point about whether we’re reactive or proactive. These support our productivity which means we have more time and information to spend on what is happening within the industry to help us identify where the risks are. We can then utilise these resources effectively.”

He elaborated that as innovation remains a key objective of the PSR alongside protecting end-user interests and competition, the work being carried out on the new payments architecture will support fintech and other organisations to be more agile.

The post-Brexit outlook

When the question of Brexit was raised by Parker, and specifically, how the PSR thinks it may impact interoperability of the UK’s payments infrastructure with those of Europe and wider global markets, Bisoffi was optimistic.

“I think the UK has and is preparing in term of its discussions and partners across Europe. Do we see any direct impact on the payment systems and the services which they provide to consumers and end users? When we look across payments, yes, there are going to be challenges, but I think what is important is ensuring that we continue to provide these services for the end-user needs and I don’t think Brexit - even a hard Brexit - is going to have an impact on this.”

Whether the PSR is willing to provide a comment about the FCA’s Open Finance Call for Input is the final area Parker raised to Bisoffi, qualifying his question in reference specifically toward digital identity.

“I don’t think anyone has yet put their arms around digital identity and said ‘You know, this is what we need to do and this is how we’re going to deliver it,’” Bisoffi explained.

“If we’re going to do this properly, it’s an absolutely enormous task. The providers of digital identity services could be PSPs or payment system providers. It depends on how you look at it. However, from an open finance perspective we are involved in those discussions with the FCA, we sit at the table and talk about open finance which is seen as a very strong initiative and which can support innovation and competition in the market.”