Awareness And Trust Lacking In Digital Payments, Says PSR Panel

May 12, 2022
The UK’s Payment Systems Regulator (PSR) has said that it wants to improve awareness of digital payments, as well as tackle the current barriers that can manifest for consumers.

The UK’s Payment Systems Regulator (PSR) has said that it wants to improve awareness of digital payments, as well as tackle the current barriers that can manifest for consumers.

The PSR Panel, which is independent of the PSR and consists of payments experts drawn from the industry, has published the findings of its review into digital payments, which was launched last year.

The report, commissioned by the PSR, highlights the challenges to the take-up of digital payments and what the potential solutions and regulatory actions could look like.

“Against the backdrop of falling cash use, the PSR Panel’s report highlights an important role for us in the transition to digital payments,” said Chis Hemsley, the PSR’s chair, in a statement, adding that making sure the transition to digital works well for all, particularly those currently reliant on cash, is a key priority for the regulator.

Overall, the report presented four areas that need to be tackled to create a better take-up.

These included an improved awareness, understanding and trust in digital payment options. According to the report, some consumers find the range of options complex, which may mean they lack the confidence and trust in them, and therefore avoid using them.

In addition, consumers’ confusion is likely to increase as new digital payment options, including open banking-based account-to-account retail payments, emerge. Consumers have limited awareness of open banking and most are not yet familiar with the open banking retail payment experience.

Consumer awareness and familiarity is not helped by the variation in the experience of open banking retail payments between providers, the report suggests, recommending the use of more consistent terminology for open banking retail payments, to help consumer familiarity.

And it is not just consumers who are in need of more education. The panel found that smaller merchants are not able to understand and compare relevant features of digital payment services.

According to the panel, there is potential for awareness-raising activities to help consumers gain a basic understanding of the different payment choices available to them.

Chip and PIN, the report suggests, is an example of a successful campaign to raise consumer awareness about a new payment type, led by the industry.

Moreover, the report recommends that the PSR should engage with the industry to encourage the use of consistent terminology for account-to-account retail payments, building on the Open Banking Implementation Entity’s work, to help build consumer and merchant familiarity and confidence.

The report also suggests the PSR should explore the scope for awareness-raising activities to help build the trust of consumers, small businesses and other small organisations, helping them navigate the payments landscape effectively to make good choices.

Tackling digital exclusion

Digital exclusion also acts as a barrier to greater engagement among consumers, the panel said, with the report suggesting that older consumers and those with a less formal education disproportionately lack the skills to make digital transactions.

Digital interfaces used in payments may be a particular problem for many older people.

The panel recommends that the PSR should challenge those with tools to address the causes of digital exclusion to do so, to remove these barriers.

Moreover, as part of this, the PSR should publicise progress towards its strategic outcome of everyone having access to payment services that meet their needs and identify where additional actions are most needed.

The report also warns that digital payments are failing to meet the needs of consumers, resulting in a continued reliance on cash.

Although the panel acknowledged that it is difficult to quantify the harms to consumers from not undertaking digital transactions, one key source of harm is the additional costs to consumers of paying utility bills by non-standard payment methods.

For example, the Personal Finance Research Centre estimated in 2019 that the premium for payment of electricity and gas bills on receipt rather than via Direct Debit was £108 per annum.

In particular, the report suggests that open banking has the potential to improve the engagement with and use of more modern, innovative payment methods.

For example, this payment method could enable consumers to see their bank balance during a transaction and before confirming the payment, which offers consumers more visibility and control over their payments.

With regard to budgeting, this would mirror a consumer checking the cash in their purse or wallet at the checkout before completing a physical retail transaction.

Open banking retail payments have the potential to reduce losses from fraud and error. Consumers do not need to trust a merchant website to store their card details, nor do they typically need to key in the bank details of the merchant, being that they are instead populated by the payment information service provider.

“Open banking represents a significant opportunity to allow people to make account-to-account payments with ease and in ways that work for them, something we have focused on in both our strategy and annual plan,” said Hemsley.

Commenting on the report, Dr. Ruth Wandhöfer, chair of the PSR Panel, said that the report had brought together a broad range of expertise and considered emerging developments across the payments sector.

“This report is a first step to understanding the barriers and solutions to increased take-up of digital payments,” she continued. “It provides both strategic and more tangible recommendations for how the PSR, together with the broader ecosystem, could help to ensure that everyone has access to digital payment services that meet their needs.”

Going forward, the PSR has said that it will engage with industry and relevant authorities on the barriers and solutions that the panel have identified to enable greater and easier use of digital payments, with a workshop planned in June, and will set out its response to the panel’s recommendations later in the summer.

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