Minutes
Date: 29 April 2024
Item 1: Welcome and introduction
Sarah Breeden welcomed members and introduced the agenda, noting apologies from Gwyneth Nurse, and provided members with a summary of her recent speech on the future of UK payments.
Item 2: Intermediaries roundtable
The Bank presented on emerging Bank/HMT thinking on the possible role of intermediaries in a potential digital pound ecosystem and sought views from the Engagement Forum on four questions:
- What clarity do potential PIPs require with regards to their core functions and obligations?
- What are the most significant revenue and cost drivers for payment service providers currently? How would those translate to D£ intermediaries?
- What are the key commercial and regulatory considerations for firms considering becoming PIPs?
- How can we lower barriers to entry and encourage innovation?
On regulation, members raised a number of questions, including the conditions for being authorised as a Payment Interface Provider (PIP), how any PIPs might be regulated and how it might compare to current regulation, and whether digital wallets for digital pound payments might also enable multiple other payment methods.footnote [1]
Members felt that the development of wallet features would be driven in part by the regulatory framework for a digital pound. They noted the likely need for scheme rules on what constitutes a permissible type of fee, and for clarity on what would happen in the event a PIP was to exit the market (either through failure or due to a commercial decision). Members also felt it would be important to consider the implications of initiatives related to open and smart data, and how consumers might move their data with them when switching PIP.
On fraud and liability, members noted that incentives for becoming a PIP would be influenced by the degree of liability for fraud/civil disputes. Other members stressed the importance of consumer protections against fraud and noted the types of protections available in current digital payment systems.
On financial inclusion, some members argued for the provision of free, basic wallets, and questioned the extent to which market forces, regulation and innovation alone could produce good outcomes for financial inclusion.
On barriers to entry and market development, members raised a number of points including the regulatory regime for PIPs, the role of regulatory bodies in the digital pound ecosystem, whether the Bank would consider making APIs freely available, and any charges PIPs might pay for access to the core ledger. They noted there would need to be clarity on privacy requirements and, subject to those, opportunities for commercial use of data by PIPs.
The Bank thanked members for their input. Responding to some of the points raised, the Bank noted the importance of questions around liability. More generally, the Bank noted there would be trade-offs between a consistent user journey in the digital pound ecosystem and allowing for differentiated commercial propositions. Standards would be vital to allowing for interoperability and smooth user journeys. Further work would be undertaken on APIs to establish how these might operate between the core ledger and wallets, and the boundaries between public and private infrastructure, as well as on how PIPs might exit the market, particularly in the event of their failure.
Item 3: Blueprint framework
The Bank presented on the blueprint framework, noting this was a high-level summary of a design note to be published in due course.footnote [2]
On financial inclusion, some members stressed the importance of education on the digital pound as part of the design phase. One member noted the need to design user accessibility principles in from the beginning to ensure any innovation benefits from the digital pound system were available to all users.
On commercial models, members queried whether the blueprint coverage of the scheme and regulation would address components such as commercial incentives for private sector intermediaries in the digital pound ecosystem. Members felt it was important to ensure industry participants had sufficient information to determine whether they could produce viable revenue and commercial models.
On the role of the blueprint, members noted the importance of this workstream being joined up with others, such as the national conversation. Generally, whilst members agreed with the broad categories of the blueprint framework, they stressed that further details of what they would eventually contain was most important.
Members noted that some issues, such as interoperability, would relate to several areas of the blueprint, and should be considered holistically. Members asked whether scheme rules would include a trust framework, setting out elements including data protection and accreditation of PIPs.
The Bank responded that many of these issues would be covered in further work on the blueprint and agreed that there were cross-cutting items that would also need to be brought together as part of the assessment workstream. On the question of revenue and commercial models, the Bank agreed this was an important consideration as participation in the digital pound ecosystem by private sector intermediaries would need to be commercially viable.
Item 4: Working groups update
The Forum was updated on the membership of the newly established working group on privacy, to be led by Dr Ruth Wandhöfer, as well as the work of the offline payments and retailer needs working groups.
Item 5: Forward look and AOB
The Forum was updated on dates and topics for discussion for future meetings in 2024, including working group reports and Bank design notes.
Attendees
Sarah Breeden (co-Chair) - Bank of England
Neeraj Patel, HM Treasury
Tom Mutton - Bank of England
Katie Fortune - Bank of England
Danny Russell – Bank of England
Diana Carrasco Vime - Bank of England
Members
Adam Jackson, Director of Policy, Innovate Finance
Bryan Zheng, Executive Director, Cambridge Centre for Alternative Finance
Chris Rhodes, CFO, Nationwide Building Society
Colin Bell, CEO, HSBC Europe
David Grunwald, Group Director of Innovation & Partnerships, NatWest
David McPhee, Chief Policy and Engagement Officer, PayUK
Diana Layfield, President EMEA Partnerships, Google
Etay Katz, Partner, Ashurst LLP
Fran Boait, Co-Executive Director, Positive Money
Harry Newman, Head of Market Initiatives EMEA, SWIFT
Jorn Lambert, Chief Digital Officer, MasterCard
Mick McAteer, Founder and co-Director, The Financial Inclusion Centre
Nabil Manji, Senior Vice President, Head of Crypto & Web3, Worldpay
Natasha de Teran, Member of the Financial Services Consumer Panel
Ruth Wandhofer, Member, PSR Panel
Simon Gaysford, Founder & Director, Frontier Economics
Simon Gleeson, Partner, Clifford Chance
William Chalmers, CFO, Lloyds Banking Group
Apologies
Gwyneth Nurse (co-Chair), HM Treasury
Arunan Tharamarajah, Head of European Banking and Payments, Wise
Arvin Abraham, Partner, Goodwin Procter
Charlotte Hogg, CEO, Visa Europe
Jana Mackintosh, Managing Director Payments & Innovation, UK Finance
Martin McTague, National Policy Chair, Federation of Small Businesses
Neha Narula, Director of the Digital Currency Initiative, MIT
Paul Bances, Head of Global Market Development of Blockchain, Cryptocurrency, and Digital Currencies, PayPal
Reema Patel, Research Director, Ipsos UK
Tracy McDermott CBE, Group Head, Conduct, Financial Crime and Compliance, Standard Chartered Bank
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Payment Interface Providers (PIPs) would provide user facing services such as digital wallets and would be responsible for initiating payments. The transfer of holdings and settlement would occur at the central bank.
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Design notes will explain the Bank and HM Treasury’s emerging thinking on digital pound technology and policy topics. As outlined in the Consultation Response, the Bank and HM Treasury intend to publish periodically discussions on material considerations related to the design of, or technology for, a potential digital pound. This is in order to enable stakeholders to understand emerging thinking, and to seek expert input, feedback and challenge at an early stage.