Thank you very much for this opportunity to speak with you today.

It was just after 3.30am on Friday, October 19th 2012 and I was wide awake. It was my wife’s birthday that day, but that wasn’t the reason I couldn’t sleep. I was sat clicking refresh alternately on my Lotus notes email and web browser. I was leading HSBC in the UK at the time, and since early evening the night before, a number of our systems had been down. It is now a matter of public record that the cause was a Nation State cyber-attack on high profile western banks and businesses in the UK and the US. I knew our customers would be angry if they couldn’t access their accounts, but if they couldn’t make payments that Friday morning, we were in for a real problem. I asked my assistant to book me a car to take me to the BBC’s Wake up to Money for just after 5am, and then on to the Today programme to explain myself to the Nation at 6.

By 2012 I had been working in Financial Services long enough to know that – in a digital era – operational resilience is absolutely key. I already knew it. But that night I got to feel it and feel it in a visceral, bodily way. For all our desires for innovation, convenience, service and value, the primary need of a payments system is that it works. All the time. And this need is heightened in an environment where geopolitical tensions mean that Payments don’t just need to be accident proof, they need to be 21st century Nation State proof. Just after 4am our websites stumbled back online. The media wrote it all up but the key point was that by the time most people woke up, they could do what they needed to do with their money.

Payments are not boring. If capital and liquidity are the heart and lungs of the financial world, payments are the central nervous system. You just can’t have a world leading economy without a world leading payments landscape to support it. Therefore, I consider it a privilege to have been asked by the Chancellor to assess where we stand today on key payment journeys, and how well set up we are to succeed in the future. I am sorry that I and my very small team could not cover all the burning questions out there today. I know that some people wanted to hear more about cash, others on international payments and others would have liked some of the questions that I raised answered – not just raised. However, there were limits to what can be done in such a short period of time, and payments is a deeply technical and interconnected – indeed intermeshed – environment. I had felt it better to be confident in framing the question accurately than answering it poorly. Since the publication of the report late last year, I am thrilled that the Government have accepted a number of the recommendations and are advancing the agenda. In particular, I am pleased that there is a focus on my central recommendation for a National Vision and Strategy.

In the next few minutes, I am not going to go over the report again, but rather attempt to give a little more colour on the key recommendations, starting with the second question around how well set up we are future success and my central recommendation.

Alice turned to the Cheshire cat and said: “Would you tell me, please, which way I ought to go from here?”

The Cheshire Cat replied: That depends a good deal on where you want to get to.

“I don’t much care where.” Said Alice

The Cheshire Cat replied: “Then it doesn’t much matter which way you go.”

This was without question the strongest feedback we received through the review ‘ –we need a North Star’. This isn’t just about helping resolve some of the potential for overlap and underlap between initiatives but can yield far more profound benefits.

It strikes me that – somewhere down the line – the Financial Services lost some of the right to build and manage its own payments infrastructure. Perhaps linked with the big drop in trust around the Great Financial Crisis of 2008, the regulatory landscape was reshaped, and we have a position today where much of the energy for major initiatives appears to be coming from the establishment – for example CMA now FCA and PSR for Open Banking, The Bank of England and PSR for NPA and Bank of England for CBDC. In the review, we did not seek to examine or judge the validity of each of these individual pieces of the jigsaw puzzle, but rather the apparent absence of a picture on the box.

We also spent considerable time looking at successful examples of infrastructure build, and the respective roles of Government, Industry and Regulators. One I know well is the Broadband Fibre Roll out – since I was CEO of Openreach during a key phase of this multi-year programme. In this example, Government provided the North Star – 95% Superfast Coverage. Ofcom had a regulatory framework – including oversight of key aspects of inclusion – such as the Universal Service Obligation. And industry then competed to deliver against the strategy.

It was not smooth or straightforward, but it did achieve results. Importantly, it also gave birth to a new generation of new Fibre competitors – such as Gigaclear and Hyperoptic – much like the burgeoning Fintechs of today.

We are not short of Regulators or Industry Bodies in Payments. The missing piece is a clear and decisive description of the future world that we are co-creating. This is the need for a National Payments Vision and Strategy. In the document I list some of the questions that this work needs to answer, but after resilience, I would advocate that the second priority is simplification.

If it is hard for a major firm to navigate the landscape – even more so for a start-up or emerging firm. And it is so vitally important that any Vision and Strategy reflects the profoundly different shape of the industry today and is built on the needs of our world leading FinTech community, as well as the practical considerations of the incumbents. Done well, such a North Star can therefore not only provide actionable guidance to Industry and Regulators alike, but additionally it can be instrumental is rebuilding trust across the wider landscape by helping reset roles in the relationships. I am thrilled that the Government has already signalled strong support for this key recommendation, and from my direct engagement with the Chancellor, I believe that there is an unprecedented degree of commitment to see this work through at pace.

Turning now to our first questions: the important journeys of paying for goods and services in person and online, as well as sending money to each other. I think that the good news is that, from a consumer point of view, the UK really is in a good place today. This is thanks to a high banked population, high debit card penetration – the latter at roughly double the global average. Additionally, the early and widespread adoption of contactless means that when it comes to paying for goods and services in person, the UK is – in my opinion – second to none.

Likewise, when it comes to paying for things online, where the widespread adoption of digital wallets has further enhanced an already leading consumer experience. The UK consumer also benefits from a raft of innovations that have helped tackle card fraud, and the dispute resolution processes are well embedded. Things could be better still, and you will probably have noted the recommendation to move Strong Customer Authentication to a more outcomes based approach. While this won’t change the world by itself, again I see an opportunity beyond this change alone in the following way…. For years the industry has pleaded for less detailed rules and the FCA in particular has signalled intent to be a more outcomes-based regulator. Well, here is an opportunity to prove it can be done – a pathfinder to set the tone for the future.

The less good news is two-fold. First, when it comes to person-to-person payments, as one contributor said in the course of this work, the problem with the UK bank transfer process is that it is “ok”. I agree. It is ok. It’s not broken enough to demand urgent action, but it’s not going to be good enough to stand the test of time. We will look very old fashioned if it does not continue to improve, but the last thing that Payments needs is a new initiative. Second, while the UK consumer gets a great shopping experience, merchants and retailers are understandably unhappy about the costs involved in card payments. I personally believe that much of the frustration is about a lack of choice – not just value.

As you know, I believe that Open Banking has the potential to play a major role in addressing both the above points. Open Banking has not had an easy birth – I know – I was running a member of the CMA 9 through much of Open Banking’s pregnancy. However, it is now not just born, but growing up fast. I am so impressed by the innovation that I have seen by both FinTech and established firms using Open Banking capabilities. When we benchmarked the latest UK innovations vs Pix in Brazil for example, from a technical standpoint, I believe that Open Banking can compete. However, there are two things that need to be addressed for Open Banking to grow into a mass person-to-person and person-to-business solution.

Thing number one is that the commercials need to be sustainable. I just don’t think it will work long term if there is such a misalignment of cost and benefit. Of course, I get that this was a competition remedy and the idea was to open up the banks, but I cannot think of a single example of where competition has flourished when structurally unprofitable. Thing number two is that – in my view – there needs to be an adequate degree of consumer protection or dispute resolution. Absent that, I fear that the consumer will have the only choice to attempt to invoke the new APP fraud rules – which could lead to significant abuse.

In the review, I did not develop the idea of linking thing one and thing two above, but in my mind, I see that as a potentially interesting avenue to explore. What I mean is that any charging structure on Open Banking could be used to fund an embedded level of basic dispute resolution. And once again I reiterate a point I make several times in the review, that any pricing model needs to protect the interests of the existing FinTech community.

But perhaps more important than the detail of the pricing solution, my primary aim with the review is to bring decisive energy to the pricing issue. JROC are already working on it, but Open Banking was incepted in 2017, and here we are six years later still arguing over what we should charge for it. Progress is being made, and I welcome the recent updates, but it strikes me as a process of marginal gains – not breakthrough. My hope is that the Future of Payments review will have helped accelerate the process of getting to breakthrough so that Open Banking can thrive and continue to improve outcomes for consumers and businesses alike.

There were a few things in the review that did not seem to have attracted much comment, but I thought were potentially quite significant. First, I asked for an ambitious 10% reduction in the regulatory workload that falls to firms. I don’t think this went down particularly well with Treasury and the Regulators considering all the things that they are required to get implemented.

However, it again provides the industry with the opportunity to prove that it has re-earned the right to innovate, and hopefully makes it easier for the FinTech community to navigate the complex environment.

Second, the call for a review of APP fraud rules after 12 months, and a more ambitious Government target on fraud. Together these have the potential to balance the effort going into refunding victims – relative to stopping the crime in the first place.

Finally, I found the impact of Big Tech in almost all areas of this work, and I was left feeling quite interested and excited by the opportunities, and equally frustrated by our apparent inability thus far to grasp them.

In addition to the 107 pages of the Review itself, I’ve now inflicted a further 2300 words on you, so perhaps I better stop there. But before I do, I want to make one final observation.

{Holds up micro chip}

Does anyone recognise this? It is an Intel XEON x5570 2.93 Ghz chip. Obviously. It sat in the core of Nationwide’s payment platform from 2012 to 2021. When I finished up as CEO at Nationwide, the Payments Team presented me with it as a leaving present. Now…don’t worry….I don’t think my leaving whip-round was a few quid short so they ripped this out of the data centres. Rather, because one of the last things I was involved with was a very comprehensive and complex upgrade of the payments platform. While this chip was in its circuit board, it processed over 150 million payments.

That’s 150 million rents, fees, jobs, lunches, birthday presents and thank you’s. The great joy and challenge of working in the Payments arena is the enormity of the way that we touch so many lives. This diversity also means that we often have competing priorities and passionately different views on the answers to the same questions. But from my travels in payments over the last four months, I am utterly convinced that everyone in this room shares a deep commitment to achieving the best possible outcomes for consumers, businesses and the wider society.

Thank you very much.