The UK Payment Systems Regulator’s ambition to increase choice and reduce costs will have to overcome significant resistance to change.

In January, the PSR announced that its new strategy would emphasise the promotion of competition between payment systems and the potential of account-to-account (interbank) payments as an alternative to cards.

But Paul Thomalla, International Head of Payments at Finastra, observes that in addition to regulation there also needs to be clear incentives for merchants to move away from recurring direct debit or card payment transactions.

“There are many factors in play that encourage banks and businesses to stick to the status quo,” he says. “For example, businesses with a guaranteed stream of direct debit payments are unlikely to encourage customers to switch to instant payments, just as banks are unlikely to encourage a move away from payment rails that offer them greater revenue potential.”

The absence of retail customer-driven demand for speed at the checkout – an important factor in B2C innovation and adoption – has led to reluctance within corporates to make the necessary investment according to Guillaume Metman, Vice President Product Management Payments at Kyriba.

“Furthermore, existing B2B payment systems work and corporates have a vested interest in keeping payments to their suppliers slow,” he says. “However, we do expect to see innovation in the B2B space when corporates benefit, for example through better security, useful embedded data, or lower costs.”

Sean Devaney, VP Strategy for Banking and Financial Markets at CGI, reckons the challenge to corporate payment innovation is more about interoperability than competition. He says the goal should not be to increase competition between schemes, but to increase competition across the payments market as a whole by making it easier for new participants to enter the market and facilitating interoperation of payment schemes.

The PSR is overseeing Pay.UK’s work to deliver the new payments architecture programme, which includes adoption of the ISO 20022 messaging standard.

“Moving to a common international messaging standard is the key to making our payment schemes more efficient, both from a participant perspective (who would only have to define a single interface that would allow them to participate in multiple payment schemes) and from a scheme perspective by making it possible to process the same payment message across multiple schemes,” says Devaney.

The PSR is also keen to promote account-to-account or interbank payments. Louise Shorthouse, Senior Payments Consultant at Icon Solutions, reckons card payment volumes online could drop by as much as 40% in the next five years by users switching to account-to-account or request-to-pay payments and that merchants who could potentially save up to 60% on their card acceptance fees.

Some EU countries are already paving the way for this shift. For example, in the Netherlands iDEAL has largely eliminated cards from e-commerce, while Poland has introduced its Blix system and the Nordic countries are pushing ahead with P27.

“It is highly unlikely that most businesses and merchants will receive account-to-account payments directly from consumers as this would create a reconciliation nightmare, but the adoption of bank transfer payments via open banking rails will continue to grow,” says James Booth, VP Head of Partnerships EMEA at PPRO.

“Instead of merchants offering this payment method directly, we will increasingly see interbank payments integrated into PSPs and gateways for merchants to link with consumers.”

For corporate finance, real-time and cut-off-free payables will offer a new level of freedom, while real-time receivables should improve the performance of working capital, suggests Metman.

“To achieve these goals, treasurers must have smooth and real-time visibility of their cash throughout the company,” he says. “This involves mastering APIs, data management and AI technologies in order to set up real time liquidity management cockpits. Today, only global liquidity management platforms can provide such functionalities, which require extensive connectivity with banks and ERPs.”