Payments Leaders' Summit’s Post

Transcript

Welcome to the Payments Leaders Summit podcast, where the brightest minds and Trail Blazers in the payments industry come together to share insights, strategies, and the latest innovations shaping the future of finance. Hi, I'm Mike Chambers and I'm the founder of Naughty Point and I'm also an advisor at the Payment Systems Regulator. We're here today at the PLS UK Summit here in London and, and it's my privilege to be joined by Paul Hallock to talk about innovation and changes in payments. But just before we start asking the questions, let me just hand over to Paul to introduce himself. Yeah, Hi, I'm Paul Hallock, I'm the Chief Payments Officer at Santander UK and I've worked in the payment industry in the UK for a number of years now. Paul, that's the introductions done. Let's have a conversation and get your views on a couple of things. A few months ago we saw a paper issued by the Bank of England around innovation in payments. And I was particularly interested in your views on what does that paper, what's the opportunity of that paper mean to you and what you and Santander and other industry players might be doing to support the themes that are in that paper? Yeah, Mike, it's, it's a great opportunity. We're really excited about the paper because we've been in conversation with a number of other institutions directly with the. Break for a while now around what is it we think needs to happen in this space, particularly from a wholesale and retail perspective. And we've been talking initially about what CBDC might mean, but also then what tokenised deposits might mean. And if you look at the paper, there's a lot in the paper around the bank's reason for being there, the anchor of money in the UK, that singleness of money and how regulated money should be the basis we do in the UK. But there's a really good section at the end, particularly on retail payments. And the most exciting thing for me is that opens the door on the commercial sustainability are on retail payments. In the UK, so there's 2 dimensions for US1 is how do we drive forward some of those really new innovations like tokenized deposits. And we're involved heavily in the regulated liability network work that's going on in the UK to take it from discovery to experimentation. And now we're looking at proof of concept. But on the retail side, it also points to how do we get the benefit from open banking from all the investment we've made in building those ability to build valuable overlays over our already fantastic payment. Systems that run underneath and how do we get some value of that for our customers and how do we get benefit of our investment? And and the point that we've been making for some time now to make this work is you need a commercial model which at least has parity to the card model. We like cards. Customers like cards. You know, my job involves looking after the car business as well as the account or account business. And what we're driving for at Santander is how do we get the best of both worlds to give customers the right outcomes for the right transaction. And cards work very well. Customers get great protection from cars. They get really good utility from cards. They get great ubiquity and acceptance in so many areas for making payments for with a card account to account, not so account to account because we haven't built the commercial model. And if, as the banker told us, they'd like a resilient alternative to cards, and if, as the PSR has told us, they'd like a competitive alternative to cards, well, actually, why don't we look at the card model and say what works really well in cards? What can we learn from that to drive into account, to account? And that starts to answer that question, I think that the bank is asking in that paper about how do we build commercial sustainability for that retail space. So we're at the moment looking at what those models look like in comparison to each other. We've actually put both arms together within the chief Homes office in Santander. You're building a joint product, a joint commercial basis for those capabilities and starting to create strategies on how we drive that forward alongside what new innovations will be required in the market. And that's where I come back to RN, because we see the opportunity of tokenism and the smart money as we really are explaining it to our board of bringing that value to the point that transaction through tokenized deposits, I think gives them really a brand new opportunity, a great opportunity to meet another level of customer demand and need. And if you see the experimentation work we did particularly well, it took the use case of online marketplaces trying to drive out fraud, creating more confidence and certainty for customers. It's all about the value customers can get from the services we can provide. So thank you for that. And that's almost all at the Bank of England paper. We've just come off mainstage here at PLS. We were talking about a national payments strategy and vision and, and let me just pick up on some of the things from that conversation and, and that you just said. We talk about open banking, we talk about a council account, we talk about the benefits and the transformation it might have. And as a consumer, my parents or my, my sister or my son, they don't need to the to know the detail about open banking and the council account, But how might that opportunity to transform the way they move? Money, the way they bang, the way they transact. What might it look like? Yeah, for for the average person on the street. Well, it's interesting, isn't it, because we keep talking about the growth of account to account. And you and I both know we've had faster payments in the UK for 16 years now. So we've had account to account payments that, as Joe Garner said, work OK in the UK. And that's one of the things I think it's held us back on some of the overlays that could create new opportunities. But what's going to be different for customers, it's leveraging that great functionality we already have in a way. That gives them more utility and opportunity and value. So a good example. And and I use my own institution. If you want to pay your credit card bill through our app today, you either pay from your own account or if you want to pay from somewhere else, you've got to pay it with another card. That's not particularly efficient from a cost perspective and from a customer point of view, it's, it's complicated, it's fiddly, it's it takes time and it takes effort. So one of the things we're doing actually right now is looking at how we can pay credit card in the app by jumping you if you have to go to. Look out, jump up to app that journey through the open banking rails as an overlay on top of what has already a fantastic meal time payment service. So it's those kind of things that we can start to create. Seamless opportunities for customers they they don't need to know it's open banking, they don't need to know it's any different what it's saying is as Santander we're giving you the most efficient way to live your financial life to give you opportunity to use the functionality we have available to you to just give you a better options. So pay credit card putting money into other accounts, paying off other debts, paying utility bills in a way that is more efficient actually gives customers time back it makes it great from a merchant perspective because that real time clearing from a real time payment is. Actually far more efficient than them than some other payment methods. And actually it starts to bring those new opportunities in a way that customers will just use them innately and naturally in the way that they're using real time payments today. Brilliant. So I'll make a payment by it, my credit card bill jumping out to our, I don't even to need to know it's open banking payments. I just know that I sorted out my credit card or debit card payment in an efficient way. Thanks for that. And we, we spoke a little bit on stage earlier today around international examples. Are we mentioned picks in Brazil? Ideal or I published A blog in payments unpacked on Monday about ideal. We talk about swish in Sweden. You know, there's lots of examples that are going on in other jurisdictions, other geographies. Just give me a bit of a, a thoughts from you around some of those good things that are happening in other countries and what that might teach us or give us hints and nudges for here in the United Kingdom. Well, Santander is a, is a global bank in the UK is actually quite a small part of of the group. And we, I think we serve around 160 million customers worldwide. So I've got lots of conversations with my group colleagues about things that are going on elsewhere and they painted a lovely picture for me recently of all the P2P services are available around the globe. And there's this, there's this black spot in the UK because we don't have a scheme with a, with a P to P capability. We had one and pay them, you and I know that quite well. But it didn't survive in the UK for a number of reasons. And one of the reasons we have today actually works as we said, OK. So some of the, the changes in Brazil, in Spain, in India around those P2P services have driven because there was a gap in the, a real requirement for customers to, to get more capability and functionality. And I, I was in Sao Paulo a couple of times this year with our colleagues in Brazil. So I managed to see picks first hand. I'll spend a bit of time talking to some of the consultants that implemented it. It didn't have an easy birth right, but it is really flying. It's giving customers opportunity at checkout which they wouldn't have had through other mechanisms. But you gotta remember number, these geographies don't have the same ingrained, mature and incredibly functional card capability that we have here in the UK. So some of the things that we are being solved for in a number of other countries are not the problem that we have in the UK. So we've got to look at what the UK opportunity is and not just look at one of the international examples and say we want one of those. And I think that's what happened in the UK that's driven the MPV conversation is I think we had a politician arrive in India and said I want one of those. And that's driven us to a a new level of. But, but it's great to see those, those developments, we can all learn from this development. That's great case studies and all of them. But it's the mix of those learnings to bring into the UK, into the MPV, which gets us to I think a different place. And, and from a UK perspective that the frustration I think we've all had is when we did the blueprint work, what 7-8 years ago now, we talked about creating a thin capable clearing and settlement layer and opening up the market to overlay capability. But because. They haven't really moved forward in our clearing the certain capability. We haven't unleashed that overlay capability yet. So we should have been there by now and we can be there if we can get on with creating stability and coherence within the central standards and rules to allow the market to get on and deliver. And I think what they learn for me is. That the UK has a very has a really vibrant competitive fintech capability and banking industry. We should leverage that to create a vibrant and competitive. Delivery to our customers and not and not necessarily try and just centralise the delivery. There's an opportunity to set really good rules, standards and guard rails, but allow the market then to deliver competitively to open up. So there's opportunities for customers and tastic and OK by by putting those in within the guard rails and letting the market open up to deliver opportunities in innovation. And my last question for you is a purely for Santander in terms of give me an example of a piece of payments innovation that you're driving forward. Yeah, and that's. That's been a frustration for me. I think coming to coming back to a a big bank again, the amount of regulatory mandatory investment we've had to make. I think I said to someone two years ago, 99% of my investment budget for the year was regulatory and mandatory. I was not faced with lots of options to do innovation. So we've done a lot of work stabilizing. We're now driving to see what we can do from an elective perspective. And we've got a few innovations that we're working on, particularly around the open banking piece. So we've just announced their partnership with a firm called Token. So we were talking earlier today about partnerships between fintech and large banks, great example. So fintech are sorry, Token are a specialist in providing that API connectivity between banks and merchants and providing new customer utility. So it allows us to put functionality into our app. We've just launched a new. Banking app actually across Europe, every country is now got the same base coat great to leverage group capability. And then I can bring in best of breed capability like token to say, how do I put new functionality in. And it's things like we said earlier, pay your credit card, put money into account. We have a bond account that right now you need to put a check into. But that that's not the way we want to be doing business for our customers. We want them to be able to do that in the app, in our real estate. So our innovation, all, all of the innovation we're driving at is trying to increase the the choices, the value choices. The customers to give those options to really make the best use of the the conversation they're having us with us through the app. So making better use of our our savings accounts, our our, our current account, the credit card we are available. We know we're launching new credit card company this year. All of that's being linked together through the app that we have. Available for our customers and the and the the big one on top of that will be cross-border. So we don't today provide cross-border services in our app. We do that online and center there is building a global payments capability called Pagan next that you may have heard of it. It's a it's a global fintech wholly owned by Santander, but it's providing services to the group and probably beyond. And they'll be providing a, an effects capability which leverages the group footprint. So if you want to send money to the US, you wanna send money into Europe or Latin America centre, those live in all those countries. It gives us a great chance to get best of, of best cost, best routing best effects into those institutions and out in then into the local clearing and doing it through our app. So that's what's coming for us. It's, it's unleashing the group through that conversation you're having in your hand. Every day. Thank you. I mean, 11 angle one and you were talking about go next and cross-border remittances and then the other end, we even got checks into the conversation. And with less than 99 million checks processed in the UK per annum and it's quite remarkable for you to get the word check into a conversation. So as you exit those checks, we'll see the see reduction in those volumes. Paul, thank you for joining me in this PLS conversation this morning. I'm Mike Chambers, thank you very much for listening to this podcast.