• 38 institutions – including central and commercial banks, as well as market infrastructures – took part in Swift experiments to simplify and speed up trade flows, unlock growth in tokenised securities markets, and enable efficient FX settlement, all while allowing financial institutions to use their existing infrastructure.
• A second phase of sandbox testing went even further, exploring more complex use cases while using Swift’s solution to connect and orchestrate transactions across simulated digital trade and tokenised asset and FX networks, alongside central bank digital currencies (CBDCs) for payments. More than 750 transactions were carried out over the course of the experiments.
• The panellists agreed that the collaborative experiments successfully demonstrated interoperability between different digital networks and trade platforms, with Swift’s solution facilitating atomic payments.
• Furthermore, smart contracts and event-driven programming enabled the automation of payments, meaning trade flows might become automated 24 hours a day, seven days a week.

• Panellists noted the importance of payments innovation for the Bank of England (BoE) and pointed to the high feedback rate (over 50,000 responses) to the BoE’s consultation on CBDCs, highlighting the interest in this innovation but also the significant concerns around privacy control, policy, and design. The payment representatives therefore welcomed the national conversation about a Sterling CBDC, which will be led by HMT.
• However, the payment specialists raised concerns about the benefit of CBDCs to customers and the associated costs of investment (although providing continued access to cash comes with its own commercial difficulties for banks). Consequently, CBDCs need to be customer led, not policy led. In addition, educating customers would be key to help with widespread adoption of digital currencies. 
• In this context, the panel compared CBDC adoption with the adoption of contactless payments. Contactless resolved a clear pain point at the Point of Sale (PoS), hence consumers switched to this payment method fairly quickly. However, digital currencies do not immediately appear to resolve a customer pain point. Therefore, acceptance could be slow. 
• The panel also highlighted that regulators are not clear on the route of payment infrastructure innovation – such as systemic stablecoins, Regulated Liability Network (RLN), New Payments Architecture (NPA) and CBDC – leaving the industry to “gamble on the winner of the regulatory horse race” in order to set priorities.

• The panel pointed to the vital role of banks in supplying customer data for the purpose of digital IDs to businesses and merchants; with bank customer data highly trusted.  
• At the same time, merchants want more easily accessible and reusable Digital ID solutions – these already exist, such as for example OneID.
• However, widespread implementation could cost millions, which is why a co-ordinated, nationwide approach is crucial. In this context, the payment specialists highlighted the need for a public consultation to help shape a commonly accepted Digital ID solution, which could also be a crucial tool in preventing fraud. 

• Looking into the future, the panel agreed that the drivers of change for UK payments – such as ISO 20022, CBDCs, digital assets, digital receipts, Open Banking and AI – will result in a better, seamless customer experience which should help reduce customers’ channel fatigue and help consumers manage their personal liquidity more easily and efficiently. Key to improving customer experiences through innovations will be to provide a strong central core product and deliver additional functionality through overlays.
• Discussing the future of Open Banking, the payments industry representatives were optimistic that Open Banking will get its ‘Transport for London (TfL)’ moment that will accelerate adoption – referring to TfL’s launch of contactless card payments and consequent skyrocketing of contactless adoption. A similar moment could happen for Open Banking if another equally large merchant deployed Open Banking. 
• The specialists also highlighted the need for collaboration around digital currencies in the near future, for example through the UK Finance RLN programme, in order to get to the next stage post the BoE consultation. 
• Another focus area for the payments industry remains customer protection against fraud, which better technology can help deliver.  

If you want to learn more about any of the topics covered at this year’s PAY360, please get in touch through your usual NatWest contact.