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To understand the current widespread appeal of BNPL apps like Klarna, Affirm, Afterpay, PayPal, and Zip today, it’s worth looking back as far as the 1990s, when the concept of paying by instalments rose to prominence in Latin American countries such as Brazil and Argentina.

In LatAm, the concept of paying by instalments, known locally as ‘parcelamento’ or ‘cuotas’ – enabling consumers to spread the cost of purchases over time – became a significant driver of economic growth in the region. From high-value consumer goods to everyday commodities, the option to pay by instalments was embedded into consumer behaviour in this part of the world more than 30 years ago.

Part of this was about increasing financial accessibility. In 1990, about 70 per cent of the adult population of Brazil, for example, had no bank account at all. Instalment payments enabled the majority of adult unbanked consumers to access goods and services without the immediate need for substantial cash savings or access to traditional credit facilities.

During this period, many Latin American countries also suffered severe inflationary surges, which further boosted instalment plan adoption as paying by instalments enabled consumers to lock in the total purchase price as it was at the moment of purchase, effectively hedging against short-term price rises. This consumer behaviour became cemented even as more and more people in this part of the world gained bank accounts and began buying more goods and services online using their bank cards. Interest-free instalment plans became the growing global Buy Now Pay Later (BNPL) phenomenon it is today and many of the emerging neobanks its champions.

BNPL used for lower-value transactions

BNPL’s growth numbers are impressive. Survey data developed by Argentine research firm D’Alessio IROL shows that in 2019, 77% of Argentine households were paying ‘cuotas’, up from 68% in 2018. Other data also tell us that instalments are increasingly being used for surprisingly low-ticket items and that their usage increases in line with purchase price: a 2019 consumer survey conducted by EBANX showed that 65% of consumers preferred to pay via instalments for products priced in the US$25-$50 range, and this percentage grows to 79% for products valued at US$50 or more.

In-store BNPL transaction volumes also rising

Although elsewhere in the world, paying by instalments was slower to catch on, there is no doubt that over the last five years, with the rise of BNPL platforms like Klarna, we’ve seen its swift consumer adoption for both in-store and via eCommerce transactions.

So, today, BNPL transactions account for approximately 10-15% of all e-commerce transactions worldwide, while nearly 40% of consumers in France were using BNPL services by 2021. Although the UK has been a little further behind in terms of paying by easy interest-free instalments, as of this year, 42% of UK adults are now using BNPL services. Indeed, as of 2023, BNPL represented about 10% of the UK’s total eCommerce transactions valued at approximately £11.46 billion. And in-store, BNPL already accounts for around 5% of UK in-store retail sales, to a value of £6.4 billion.

According to Bloomberg, the BNPL market in the UK has increased tenfold over the last five years, driven by a combination of the cost-of-living crisis, higher interest rates from other forms of credit, and the disappearance of the alternative – payday loans.

There is no doubt that merchants are seeing the opportunity to increase sales and attract more consumers to buy from them. Furthermore, research shows that consumers are prepared to buy 15-20% more expensive products if they can pay by instalments. Online basket values rise by even more than that for younger consumers – most notably Gen Zers and Millennial-age consumers now aged 13 to 44.

BNPL CAGR at 9%

Digital payment options like PayPal’s Pay in 4, Klarna, Afterpay, and Affirm have grown increasingly popular in online shops across the world. According to Statistica, the global Compound Annual Growth Rate of this alternative payment method is estimated to be nearly 9% between 2023 and 2028.

While the benefits are substantial, businesses must navigate certain challenges when implementing instalment payment systems. One major concern is credit risk management. Since extending credit always comes with the possibility of defaults, businesses must have strong systems in place to handle potential losses, charge late payment penalties and seek recovery of late payments, for example.

BNPL regulation coming

In addition, it is clear from our investigation into several countries’ National Payments Visions, which I covered here back in February, tighter regulation of the BNPL space is coming everywhere. The UK financial regulator, the Financial Conduct Authority, has already been tasked by the UK Government with rolling out new regulation covering BNPL by July 2026. The new rules will require BNPL providers to make sure customers can afford repayment before offering a loan, and to issue “clear, simple and accessible” information about loan agreements in advance. Draft regulation also says BNPL companies will need to offer refunds if consumers run into problems with the products they purchase.

The new European Directive on Consumer Credit, adopted by the European Council on 12th October 2023, focuses on credit agreements with a value of under €200. This new directive seeks to set transparent guidelines for split payments and curb excessive debt scenarios. These regulatory changes have the potential to bring about a transformation in the business model and marketing practices of BNPL services all over the world.

In the States, in May 2024, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule classifying BNPL lenders as credit card issuers under the Truth In Lending Act (TILA), and it has since implemented Regulation Z. This rule aimed to extend consumer protections traditionally associated with credit cards to BNPL products, such as the right to dispute charges and requirements for clear disclosures. However, earlier this month, the CFPB announced plans to revoke this interpretive rule due to legal challenges and industry pushback. Despite this recent development, it is clear that tighter regulation of BNPL remains inevitable.

Emphasis on smooth CX as BNPL is regulated

So, the emphasis, both in eCommerce and in-store POS transactions, must be on building seamless Customer Experience (CX) into the checkout process, despite the increasing likelihood that consumer protection guardrails and credit checks will need to be built into transaction processes, for the inevitably increasing number of consumers electing to pay by easy interest-free instalments.

At Mypinpad, we are already enabling some of these more complex payment journeys – building this functionality into our SDKs – enabling delivery and signing of BNPL contract agreements within payments workflow integrations for the likes of Brazil-headquartered Nubank and Mercado Pago. We anticipate working with more acquirers to create seamless and yet compliant BNPL processes and workflows as BNPL regulations start to bite around the world.

The history of Point of Sale systems in retail is highly instructive. Over the last 150 years or so, we have moved from the very first mechanical cash registers invented by James Ritty, who founded the National Cash Register company (NCR) way back in 1884; through to the Electronic Cash Register (ECR) which offered the first digital displays and enabled retailers to store transaction data electronically; and on to computerised Point of Sale (POS) systems which were capable of integrating barcode scanners, receipt printers and customer displays in the 1980s.

Modern retail Electronic POS (EPOS) systems have evolved over the last 20 years to include cloud-based solutions, mobile connectivity, and advanced software applications offering real-time analytics, mobile payment options, and enhanced customer experiences. The evolution from mechanical cash registers to sophisticated retail EPOS systems has significantly transformed the retail industry, making transactions more efficient and secure.

However, up until recently, Retail POS systems have not been sufficiently focused on the Customer Experience (CX) itself. This lack of focus on CX is still evident in many recently rolled-out self-checkout solutions, which still feel clunky. The CX is generally led by the Retail EPOS system offering a large touch screen customer display which guides us through their checkout process, including scanning the barcodes on items, or finding them on a visual inventory display, perhaps even weighing them to determine the price of those apples, adding carrier bags, and watching the total cost rise until the point of payment.

More often than not, you then select the payment method via the EPOS screen, and the total is sent across to the separate payment terminal which is attached to the self-checkout station. It all feels slightly disconnected—far from seamless. This configuration represents what I call the Hardware or Hardware Plus-led approach in which software integrations are still difficult, while cybersecurity updates and functionality improvements remain hard to roll out during opening hours.

However, in the next generation of EPOS displays now being built, we are finally seeing Software-driven Retail EPOS solutions—characterised by a combination of large touchscreen self-service checkout displays with in-built NFC-based payment capability on-screen, not via those old familiar hardware payment terminals normally located sitting in a hole at the bottom of the digital POS display.

We are also increasingly seeing retail assistants emerging from behind their checkout counters holding handheld tablets and POS terminals, which offer the same ability to browse stock visually using a touchscreen colour display, and then going on to assist customers to pay and issue receipts.

What is going on behind the scenes to enable these smart EPOS systems which combine great CX with smooth and yet highly secure payments? Well, it may well be that a Mypinpad SoftPOS Software Development Kit (SDK) is enabling compliance with the very latest PCI MPOC (Mobile Payments on Commercial Off-The-Shelf) standards. That same SDK can be configured to handle multi-channel payments via the retailer’s app, Mastercard, Visa, Apple Pay, or even via a QR code offering a percentage discount or offer in-store.

That same SDK should also ensure that the smart POS terminal or self-service EPOS display is keeping that payment fully secure so that any personally identifiable information (PII) and banking details are hidden and remain highly secure. Now that you are in ‘software land’, as I prefer to call it, the latest security updates can be delivered ‘on the fly’ in near real-time as new vulnerabilities are found and patches become available.

More than this, now that upgrades and new functionalities are being delivered via fresh APIs and SDKs, it becomes possible to build highly customised CX at point of sale. The relatively low cost and high availability of this software make it possible for retailers to build and roll out bespoke and yet highly secure, seamless user experiences based on even the narrowest of use cases.

So, it’s finally possible to build highly differentiated customer experiences which display purchasing options attractively on a range of touchscreen displays, support browsing and product configuration and selection, and then seamlessly enable purchasing—with or without a retail assistant supporting the customer along the way.

Customer experience is no longer an afterthought when building retail POS systems. CX is finally taking centre stage in the latest generation of POS systems.

All of these can lead to disengagement, miscommunication, and reduced trust — especially in the isolation of remote work.

In his book Supercommunicators, Charles Duhigg emphasises that great listening is active and intentional.  It can easily be applied to remote settings.

Ask the Right Questions

Great listeners guide conversations by asking insightful questions that uncover deeper meaning.  Challenge your teams with the right questions, pushing them to think critically and find solutions themselves.

• Remote: We have a lineup of robust collaboration tools at our disposal like Microsoft Teams (Forms) and Slack polls, Q&A features, or asynchronous video updates/messages to encourage thoughtful responses without putting people on the spot.

Reflect and Validate

Active listening involves summarising, validating, and responding thoughtfully to demonstrate understanding. It creates psychological safety, making people feel heard and confident in sharing their ideas. Google’s Project Aristotle found psychological safety to be the top predictor of successful teams.

• Remote: Summarise key points in Microsoft Teams, Slack, email, or project management tools e.g., “I hear you saying X. Let’s explore Y further”. Use emoji reactions,voice notes, or short check-in videos to make responses feel more personal and engaging.

Reflecting and validating ideas makes people feel valued and encourages more meaningful contributions.

Balance Talking and Silence

Great communicators know when to pause and let the other person think and respond.  They draw out the best in people by making space for them to contribute rather than dominating discussions.  Tim Cook, CEO of Apple is known for a quieter, more measured style, often pausing in meetings, giving space to others to contribute.  Silence can be powerful—it creates room for deeper reflection, independent thinking, and stronger engagement.

• Remote: Embrace intentional pauses in Zoom or Teams calls to provide attendees with the opportunity to process and contribute.  Utilise chat features to enable quieter team members to share insights without needing to speak immediately.  Encourage asynchronous brainstorming using collaborative tools e.g. Notion, Miro, Google Docs, Confluence, Lucidspark to let ideas develop over time.

Focus on Emotions, Not Just Facts

Research suggests that people want to feel emotionally understood, not just intellectually acknowledged. Emotional validation activates the brain’s bonding systems, leading to trust, safety and openness. Great leaders invest in their people’s growth, recognising their emotions and motivations to unlock their full potential.  They strive to build their emotional intelligence to foster trust, engagement, and sustained success.

• Remote: Start meetings with quick personal check-ins e.g. “What’s your energy level today on a scale of 1-10?”. Recognise emotions in messages and show empathy. Use 1:1 virtual coffee chats to maintain human connection beyond work discussions.

Satya Nadella himself wrote in his book, Hit Refresh:

“Listening is the most important thing that I accomplished each day because it would build the foundation of my leadership for years to come.”

By leveraging asynchronous tools, structured interactions, and digital empathy, you can make remote communication just as effective as in-person.  It requires intentional communication and leveraging digital tools effectively. True leadership isn’t about talking the most—it’s about listening the best.

These are not just soft skills, they’re strategic and effective. How do you ensure your team feels heard?

Communication remains one of the most underrated and underdeveloped leadership skills.  A survey by The Economist Intelligence Unit found that miscommunication is a major cause of workplace failure, resulting in delays, missed goals, and lost revenue.

So, what does effective communication really look like in today’s leadership environment?

As a member of a Senior Management Team in a fully remote environment, we often consider the benefits of in-person communication and the power of this should not be underestimated.

Rooted in neuroscience, psychology, and evolution, in-person communication engages mirror neurons for empathy, triggers oxytocin to build trust, and utilises multiple senses for deeper emotional impact. With 70-90% of communication being nonverbal, facial expressions, body language, and tone enhance understanding, while the brain processes face-to-face interactions more efficiently and accurately.

Can effective communication be achieved in a fully remote environment?  I believe it can. Some of the science can be captured remotely by applying similar strategies used in face-to-face communication, with some adaptations to fit the virtual environment.

This post begins a series over the coming weeks exploring research and methods to address this challenge.

Clarity Over Complexity

In the brilliant book Smart Brevity, the emphasis is on clarity, efficiency, and impact in communication, cutting unnecessary words whilst keeping the message compelling.  Here are the key principles:

• If remote, then camera on – Should be the norm rather than the rule; enhances non-verbal communication, accountability, psychological safety and efficiency.
• Lead with the essential – Start with the key takeaway.
• Be concise – Cut fluff, use short sentences. No rambling.
• Make it skimmable – Use formatting and bullet points to guide attention.
• Provide context – Explain why it matters and give just enough detail to avoid overload.
• End with action – Tell the audience what to do next.

To achieve this, leaders must understand and genuinely believe in what they are communicating because it directly impacts credibility, influence, and their ability to inspire others.

Jeff Bezos, Tim Cook, Winston Churchill, Madeleine Albright and Brené Brown all used concise, impactful, action-orientated communication to distil complexity into digestible communication.

Leaders, write your message, then cut 50% of the words while keeping the key point intact.  Make your communication clearer, more engaging, and easier to act on. It saves time, builds trust, and ensures staff quickly understand and retain essential information.

PIX is an instant payment platform created and managed by the Central Bank of Brazil. It went live in late 2020 and by 2024, it enabled 246 billion transactions worth a total of $3.3 trillion. That’s a Compound Annual Growth Rate (CAGR) over that four-year period of a whopping 34%! In Brazil, RTPs are now worth 27% more than both credit card and debit card transactions put together.

How does that compare with credit card and debit card transaction growth over the same period in Brazil? Between 2020 and 2024, credit card transaction values still rose from $1.18 trillion to $1.35 trillion – a CAGR of 3.4%. Whereas in Brazil, debit card transaction values rose from $910 billion in 2020 to $1.05 trillion in 2024 – a highly respectable CAGR of 8.3%.

What do these figures tell us? They certainly put numbers around the impressive growth in the number and value of RTP transactions being completed in this fast-growing emerging economy. However, they also indicate that, thus far, the card networks and their issuing banks don’t appear to have stopped growing their transaction values as a result of the rise in RTPs.

Let’s take a look now at why RTPs have seen such meteoric adoption over the last few years. Several factors have been at work:

Central government sponsorship

Firstly, the most successful RTP platforms in terms of adoption have essentially been mandated by central governments, set up either by a consortium of national banks or by one single central bank, as is the case with PIX. In the main, the systems are governed by a central regulator. So, Singapore’s RTP called PayNow was set up in 2017 by an association of major local banks and is regulated by the Monetary Authority of Singapore. RTP platforms are effectively subsidised by central governments. So, RTP fees are close to zero. For example, PIX fees average 0.22%, whereas the average Merchant Discount Rate (MDR) for debit card transactions sits at 0.5%, and at 1.63% for credit card transactions in Brazil.

Cash conversion (to RTPs)

Secondly, their runaway success in terms of adoption has been in emerging market countries. Why? Because a large part of the growth of RTP transactions has been at the expense of cash transacting. Yes, in places like India up until about 10 years ago, a huge number of transactions by one-man bands and microbusinesses, especially involving low-value transactions, were paid for with cash. Millions of people there and across the world were locked out of access to credit and even debit cards – many were unbanked.

However, nearly all of them have a smartphone today. They can log into the relevant mobile app and send money instantly to a merchant or friend now. Much of this would have been done by handing over well-worn rupees just a few years ago. The good news for banks and card networks is that RTPs’ growth is not at their expense. Quite the reverse, in Latin America, the World Bank is already on record saying that real-time payments platforms like PIX have helped drive bank account ownership from 39% to 74% of adults within the last decade.

To show the extent of this symbiotic relationship, you only have to look at the growth of BNPL (Buy Now, Pay Later) transactions and even of RTP transactions which are underpinned by credit card balances (so-called “Credit via RTP”). For many in lower economic groups in emerging markets, RTPs are giving them access to credit through a financial institution for the very first time in their lives!

However, for real-time payments to really take off, they need to work well for three key groups: the banks, businesses as well as consumers. Each has its own interests and incentives, and each has a potential stake in the success of RTPs:

Banks

Even if consumers had access to mobile banking, that didn’t mean that they were going to use bank transfers to pay for things. To make that leap from theoretically possible to practically useful, banks needed to make RTPs seamless to use. That might mean allowing people to send transfers to aliases (such as phone numbers) rather than entering long sort codes and account numbers, or investing in marketing to teach their users about RTPs. These changes required an investment on the banks’ part. In some markets, banks were motivated to do this to counter the rise of digital wallets, which they worried would disintermediate them. In other countries, they did so to encourage the digitisation of payments.

Different countries had different RTP adoption journeys. For example, in 2005, the Swedish government decided to shift the cost of handling cash onto commercial banks to reduce their costs. The banks responded by deciding to push Swedish people towards digital payments. Initially, the banks tried to incentivise the use of cards, but that still left millions of peer-to-peer (P2P) payments occurring in cash. So, in 2012, Swedish banks came together and developed ‘Swish’, a mobile app that allows instant P2P bank payments, thereby creating the country’s first RTP platform.

Small Businesses & Mobile Workers

Small businesses quickly perceived their own advantage in accepting real-time payments. Labourers doing up your house and microbusinesses were the first to embrace RTPs. Bank transfers typically have lower processing costs than credit cards and less fraud relative to traditional banking methods, and they don’t require card terminals or cash registers—making them easy to implement. And the money hits your bank account immediately. Gone are the days of waiting for that customer’s cheque that’s ‘in the post’.  Microbusinesses could avoid the intrinsic costs associated with hiring a POS terminal, paying card transaction processing fees, and waiting for next-day clearance of funds.

The NIBSS Instant Payment (NIP) system, which launched in Nigeria in 2011, shows how benefits for retailers can help drive RTP adoption. Prior to NIP, most businesses relied on cash because they valued the immediate access to funds. For millions of small business owners in Nigeria, the difference between getting your money today or in a few days could be the difference between staying afloat and going under. With NIP, businesses can now get both immediate access to funds and avoid the risk of carrying cash. They can also transact safely across larger distances, no longer having to move cash across the country, which was expensive and often unsafe.

Consumers

Once banks made RTPs easy to access, consumers were quick to embrace them as digital alternatives to cash. Sending funds to a phone number or an alias, rather than using a long IBAN code or sort code and account number, made bank transfers quick, easy, and something people could do from anywhere. They also allowed users to avoid the hassle and risks of carrying (and losing) cash. Naturally, P2P RTP methods sprouted up around the world.

Furthermore, RTP is increasingly enabling popular, low-cost, cross-border instant payments. For example, Project Nexus, an initiative by the Bank for International Settlements (BIS), connects domestic instant payment systems (IPS) to enable fast, cost-effective, and transparent cross-border payments. This project has made substantial progress in linking IPSs across multiple countries, including Indonesia, Malaysia, the Philippines, Singapore, and Thailand.

Will there be any losers?

So, the question remains, is the traditional card fee model fatally undermined by the arrival and rapid adoption of RTPs? The answer is no, not uniformly. Some geographies and some types of businesses and types of consumers are clearly early and enthusiastic adopters of RTPs. However, many of these people were previously operating outside the traditional banking system anyway as we’ve discussed. In fact, RTPs presents an opportunity to serve these new prospective customers with value-added financial products for the first time.

Where are the areas of risk and opportunity for card issuers and paytechs as a result of the rise of RTPs? It’s clear that more and more smaller merchants are likely to be gravitating away from expensive payments hardware – most notably POS terminals. It seems likely that this dynamic will be more pronounced in emerging markets that are rapid adopters of RTP systems.

SoftPOS opportunity

However, that creates an opportunity for SoftPOS paytech innovators like Mypinpad because, like RTP payments, they are mobile-based rather than hardware-based.  That allows merchants to accept both RTPs and SoftPOS payments on the same device which they already have in their pocket. The customer will choose which method suits them best—with many choosing to have micropayments on RTP and larger payments on card. There is, therefore, a symbiotic relationship between RTP and SoftPOS for the most part which is not true for traditional payment terminals.

For larger merchants, SoftPOS’ ability to enable secure payments that are integrated into and embedded within complex, customised workflows designed to improve the customer experience. It will be up to incumbent technology providers, issuers and acquirers to impress merchants with value-added services around transactions moving forward.

Next time, I’ll take a deeper look at some of those use cases and complex workflows that are likely to receive wider adoption, as incumbent players are threatened with the loss of transaction volumes and fee levels over the coming years as RTPs continue their inexorable rise.

National governments around the world have been publishing their National Payments Visions (NPVs). In November 2024, the UK’s HM Treasury published its own NPV, while Switzerland published its equivalent document in March 2023. Here in Singapore, we have the Monetary Authority of Singapore’s payments vision output and roadmap, which is equally detailed.

The trend is towards a much more hands-on approach to financial systems – especially regarding newer digital systems and digital currencies. This is an opportunity and a threat to everyone but especially to traditional financial service providers and intermediaries.

HM Treasury’s NPV was a response to The Garner Review, also called the Future of Payments Review 2023, which made 10 key recommendations to enhance the UK’s retail payments ecosystem. These are:

1. Promote Innovation: Encourage the development and adoption of new payment technologies to keep the UK at the forefront of global fintech.
2. Enhance Security: Strengthen measures to protect against fraud and cyber threats, ensuring consumer trust in payment systems.
3. Improve Accessibility: Ensure payment systems are inclusive and accessible to all segments of society, including those with disabilities.
4. Increase Competition: Foster a competitive environment that allows new entrants to thrive and challenge established players.
5. Regulatory Coordination: Streamline regulatory processes to reduce complexity and improve efficiency across the payments landscape.
6. Consumer Protection: Enhance consumer protection mechanisms to safeguard users from potential risks associated with digital payments.
7. Sustainability: Promote environmentally sustainable practices within the payments industry.
8. Cross-Border Payments: Improve the efficiency and cost-effectiveness of cross-border payments to support international trade.
9. Data Privacy: Ensure robust data privacy standards are in place to protect consumer information.
10. Public Awareness: Increase public awareness and understanding of digital payment options and their benefits.

Moving towards cashless economies globally

NPVs are partially also a response to the fact that more and more payments are happening digitally, a rising percentage of which move via digital wallets. Furthermore, they increasingly don’t require a physical bank card; a quarter of all card-based transactions are now contactless, and this percentage rises year on year around the world. In the US, cash transactions represent just 5% of the value of consumer payments, as cash usage continues its steady global decline.

Payments CX and safety tightrope

The themes of innovation and competition riding alongside the establishment and enforcement of guardrails to keep nations’ citizens’ money safe appear to be universal. There’s lots of emphasis on using AI to help spot trends which can help stop fraudulent transactions before money moves.

Perhaps chief amongst the technological challenges is achieving interoperability between legacy transaction infrastructure and the new digital payments world. The other notable challenge is to keep payments safe—while simultaneously ensuring the customer experience (CX) at the point of sale remains quick and easy.

The Financial Conduct Authority (FCA) is being tasked by HM Treasury with quite a few regulatory interventions to keep digital payments running both smoothly and safely. The NPV tasks the UK financial regulator with looking again at the Strong Customer Authentication (SCA) with a view to improving CX at both retailers’ POS terminals and via e-Commerce. The regulator needs to find a more innovative, as well as more proportionate way to provide SCA. Less secure two way authentication systems like OTPs (One Time Passwords) may be scrapped in favour of a more secure authentication system. Watch this space.

The FCA has also been given the role of Open Banking regulator, which means that it must help develop and oversee the Open Banking ecosystem. There is also a requirement for both the FCA and the Payment Services Regulator (PSR) to work better together to ‘remove regulatory congestion’ in the quest to tackle payments-related fraud. Unauthorised fraud losses covering payment cards, remote banking, and cheques in the UK totalled £708.7 million in 2023. Meanwhile, authorised push payment (APP) fraud losses were around £459.7 million that year.

Instant Payments

There is also a push to enable instant payments everywhere. Southeast Asia and India appear to be ahead in adoption of payments technology enabling instant transfers across borders. In the UK, for example the ‘D+1 (day after the day of the transaction) Principle’ still holds but the NPV makes it clear that this must be phased out. This change is tied to the new Payment Services & Electronic Money Regulations due to be published by the FCA within the next six months.

Instant payments are particularly important because of the rise of the Account to Account (A2A) market globally. The total value of A2A e-commerce transactions in 2022 was $525 billion, and is projected to reach $850 billion by 2026. Without instant payments, A2A transactions build central bank credit risks.

Secure sharing of customer data

There is also a larger emphasis being put on payments data portability, data controls and so-called ‘smart data’ powers. For example, the new Digital Markets, Competition and Consumers Act 2024 includes provisions related to the sharing of data linked to payments. Specifically, it aims to enhance transparency and competition in digital markets via:

1. Data Portability: Firms with Strategic Market Status are required to facilitate data portability, allowing consumers to transfer their data, including payment data, between different service providers.
2. Open Banking: The Act supports the principles of open banking, ensuring that consumers can securely share their payment data with third-party providers to access better financial services and products.
3. Consumer Control: It emphasises giving consumers more control over their data, including the ability to consent to and manage how their payment data is shared and used.

In addition, the FCA is being tasked with regulating Buy Now Pay Later (BNPL) products which is a massively growing area of the digital payments landscape all over the world. UK regulation should be in place for BNPL by July 2026.

DLT, Stablecoins and CBDCs

All national payments visions are also grappling with the concept of creating Central Bank Digital Currencies (CBDCs). Although no country has fully launched a wholesale CBDC yet, several countries are actively piloting them, including China, Japan, the UK, and the European Union. These CBDCs are being tested for cross-border transactions and other financial applications.

Essentially, a wholesale CBDC is a digital form of central bank money designed for use by financial institutions for interbank payments and securities transactions. They facilitate large-scale, low-frequency transactions between financial entities.

Claimed key benefits of wholesale CBDCs include:

1. Enhanced Efficiency: They streamline interbank settlements, reducing the need for intermediaries and speeding up transaction times.
2. Cost Reduction: By simplifying the settlement process, wholesale CBDCs can lower the costs associated with cross-border payments.
3. Improved Financial Stability: Central banks can use wholesale CBDCs to provide liquidity to financial institutions during times of stress, helping to maintain stability in the financial system.
4. Monetary Policy Tool: Central banks can directly control the supply of wholesale CBDCs, making them a useful tool for implementing monetary policy.

Whether or not the benefits are true is moot. What is key is the vision around being directly involved in transaction flows at a granular level.

Meanwhile, DLT (Distributed Ledger Technology) promises efficiency gains in post trading i.e., in clearing, settlement and custody of assets. A shared ledger increases transparency and simplifies the booking of transactions. It also eliminates the need for costly and error-prone reconciliation processes between different databases on different systems.

It potentially makes it possible to borrow against previously illiquid assets, like works of art via digital tokens—transacting these assets via the transfer of tokens written into ‘smart contracts’. We are at the dawn of a brave new digital currency world. The only question is, will it make us all richer? Who knows? However, it is likely that it will increase the amount of money in regular use and quantity of value being transacted. 12% of UK adults and 20% of Singapore’s citizens already hold some cryptocurrencies, and that percentage is rising year on year around the world. In response, some central banks will probably launch ‘Retail CBDCs’, essentially tokenised cash, within the next couple of years.

These NPVs serve to remind us of the pace of the digitisation of payments and national currencies themselves all over the world. Increasingly, our transactions will be automated and embedded into our daily lives, and the need to present something (other than a mobile device to transact) will fall away.

Remaining global while building national-level payments resilience

However, this rapid transition away from cash and physical card presentation presents its own challenges for financial institutions, regulators, and governments who are cognisant that they must protect their citizens’ wealth, while freeing the market to innovate and remain highly active and helping to drive economies locally as well as globally. The current emphasis on bolstering (or at least protecting the independence of) the nation-state has brought back into sharp focus the need for governments to protect the finances of their citizens—while also safeguarding the financial infrastructure of the country in this transition.

So, payments visions are about protecting national finances, while simultaneously enabling the increase in the speed of circulation of money around the world . Does it also mean that we need to be able to ringfence national financial systems when, or if, other country’s systems are faltering? It implies the need for the building of a new payments architecture which absorbs the benefits of new digital technologies, while also creating some sort of payments ‘firewall’ for when global systems or schemes glitch or fail.