The UK government is pushing for a significant shift in how consumers and businesses make everyday transactions, with a focus on reducing reliance on traditional debit and credit cards to lower costs for small businesses and foster greater competition in the payments market.
In written parliamentary responses published this week, the Treasury highlighted ambitions outlined in the National Payments Vision to develop “seamless account-to-account payments” as a widespread, card-free digital option.
This would allow shoppers to pay merchants directly from their bank accounts, in stores or online, without routing transactions through card networks like Visa or Mastercard.
The responses, provided by Lucy Rigby, Parliamentary Under-Secretary of State at the Treasury, came in answer to questions from Labour MP Sarah Edwards about reducing payment acceptance costs and boosting competition for small businesses.
Both replies emphasised that card fees – capped at 0.2% for debit and 0.3% for credit under the Interchange Fee Regulations 2015 – remain a concern, alongside other processing and scheme charges.
The Payment Systems Regulator (PSR) has completed market reviews into card fees and is weighing remedies to improve transparency.
Account-to-account payments
The government sees account-to-account (A2A) payments as a key way to introduce ‘greater choice’ and ‘downward competitive pressure’ on costs.
Such systems, already common in countries like Sweden (via Swish), India (UPI), and Brazil (Pix), enable instant, low-cost transfers directly between bank accounts, often bypassing card schemes entirely.
This push aligns with broader efforts to build a more sovereign and resilient UK payments infrastructure.
In recent months, the Bank of England has signalled plans for public consultations on alternatives to debit and credit cards, with Deputy Governor Sarah Breeden noting the goal of enabling direct bank account payments as a complement to cards.
Industry discussions, including meetings to establish a “DeliveryCo” entity under the Retail Payments Infrastructure Board, aim to create a national alternative that could reduce dependence on US-based networks like Visa and Mastercard, especially amid geopolitical concerns.
The digital pound (a potential central bank digital currency, or CBDC) remains in its design phase through 2026, with no final decision yet on issuance.
The end of cards?
The move is unlikely to mean the end of the entrenched Mastercard and Visa ecosystem.
Instead, the government is likely to push for the coexistence of multiple methods while promoting innovation in faster, cheaper options like A2A, potentially including tokenised deposits or stablecoins in the mix.
Notably, the Bank of England and Treasury are working on a blueprint, including experiments via the Digital Pound Lab, but any rollout would come later in the decade and would complement, not replace, existing forms of money.
For small businesses, the implications could be significant. Lower transaction fees from A2A alternatives might ease the burden of card charges, which merchants often cite as a pain point, especially for low-margin operations. T
he government frames this as part of building a “trusted, world-leading payments ecosystem” on next-generation technology.
Leave a Reply