Rely on the most comprehensive, up-to-date legal content designed and curated by lawyers for lawyers
Work faster and smarter to improve your drafting productivity without increasing risk
Accelerate the creation and use of high quality and trusted legal documents and forms
Streamline how you manage your legal business with proven tools and processes
Manage risk and compliance in your organisation to reduce your risk profile
Stay up to date and informed with insights from our trusted experts, news and information sources
Access the best content in the industry, effortlessly — confident that your news is trustworthy and up to date.
Find up-to-date guidance on points of law and then easily pull up sources to support your advice with Lexis PSL
Check out our straightforward definitions of common legal terms.
Our trusted tax intelligence solutions, highly-regarded exam training and education materials help guide and tutor Tax professionals
Access our unrivalled global news content, business information and analytics solutions
Insurance, risk and compliance intelligence using big data, proprietary linking and advanced analytics.
A leading provider of software platforms for professional services firms
In-depth analysis, commentary and practical information to help you protect your business
LexisNexis Blogs shed light on topics affecting the legal profession and the issues you're facing
Legal professionals trust us to help navigate change. Find out how we help ensure they exceed expectations
Lex Chat is a LexisNexis current affairs podcast sharing insights on topics for the legal profession
Discuss the latest legal developments, ask questions, and share best practice with other LexisPSL subscribers
As part of our sector-focused series, we have spoken with our esteemed colleague and financial regulation solicitor, Rory Copeland. Below, he gives us his thoughts on the key legal trends to watch in payments for 2020.
This article focuses on: instant payment fraud, Customer Authentication (SCA), open banking and the privatisation of currency.
Look out for similar 'Legal Trends to Watch' articles from the series, focusing on different industry sectors and practice areas, and read more of Rory's pieces here.
Regulators, industry bodies and government departments all
realised in 2019 that ubiquitous instant payments provides a huge market for
payment fraud. Specifically, new 'authorised push payment' (APP) services allow
a payer (often through the medium of their phone or computer) to send money
directly from their bank account to another bank account. These payments don't
engage card networks or credit clearing (which occurs when a cheque is sent),
so are instant for the most part.
Whilst APP is good news for many businesses and consumers, it
also creates a huge market for fraud. APP fraud is a growing phenomenon in the
UK and is well-documented. As online and mobile banking has become more widely
used, regulatory responses to APP fraud have begun to crystallise and may be
implemented in 2020.
Firstly, Confirmation of Payee (CoP) is a mechanism developed by
Pay.UK. Every bank account has a unique sort code, account number and account
name, but only the former two are needed by payment systems to execute a
transfer. Fraudsters can 'intercept' a payment by impersonating the intended
payee and providing different account details. CoP will ask a payer to confirm,
before a payment is executed, whether the account number to which their payment
is directed matches the account name which is in fact tied to that account.
Secondly, 2019 saw the establishment of the APP Voluntary Code,
which sets out the protections that banks and other payment service providers
(PSP) will put in place for their customers. An important and innovative component of the code is a 'no blame pot' to compensate victims when neither
their PSP nor the payee's PSP was at fault in a fraud. PSPs failed to reach a
consensus on how to fund the pot in November 2019, but the pressure will be on
major financial institutions to ensure the Code is system is implemented in
Thirdly, a UK treasury report in November 2019 recommended that a
24-hour delay on all first-time payments by consumers to new accounts. The
policy motivation is to give potential victims the chance to discover the fraud
or confirm the account details with the intended payee. Whether this 'speed
bump' proposal becomes law in 2020 will hinge upon ongoing discussions between
the Treasury, regulators and industry bodies, as well as a full assessment of
whether it will have any preventative impact.
The rules on Strong Customer Authentication (SCA) have been
regarded by some as the Achilles heel to the otherwise revolutionary provisions
of the EU's second Payment Services Directive. The headline proposal, that all
payments for goods should be authenticated using two unrelated pieces of
evidence known as 'factors', is a commendable counterweight to the ease of
instant payments. In the contexts of physical stores and mobile shopping, the
rules meet strike a good balance between consumer convenience and account
security. But 'card-not-present' purchases have been severely affected by the
choice of authentication factors which the European Banking Authority (EBA) has
So unrealistic was the deadline for compliance with the SCA rules
that the UK, numerous other EU countries and subsequently the EBA has
implemented phased implementation plans. The EBA timeline is shorted than that
previously agreed by UK Finance, the representative industry body, and requires
all PSPs to comply with the rules by the end of 2020. A lot hinges upon the
development of technology platform 3DS v.2.2, which is used by a large number
of merchants to facilitate online retails transactions.
Following the creation of the bank account switching tool, the
Financial Conduct Authority (FCA) is now applying pressure on barriers to
mortgage and investment platform switching. In October 2019, the FCA's set out
its policy statement on the need to assist 'mortgage prisoners' who were faced
with prohibitively high switching fees even when they were up-to-date with
payments. The regulator has also proposed to restrict or ban exit fees which
are often charged by investment platforms to users.
Running in parallel to these policy positions have been a range
of marketplace innovations which may attract much more attention in the year
ahead. Mortgage platforms offer to on-board customers in days rather than weeks
using account information provider authorisations. Others compare the market
continuously for re-insurance options and give switching advice based on live
bank account data provide by the customer. A YouGov poll sponsored by Dashly, a
re-mortgaging comparison tool, found that 29% of UK borrowers would permit a
firm to automatically re-mortgage them to a better deal without informing them.
Momentum clearly lies with those open banking propositions which go far beyond
Facebook's 'Libra' project—to create a cryptocurrency payment
system which could power free and instant transactions between anyone –
received a hostile response from almost every major financial regulator
worldwide. The litany of concerns was wide-ranging and included financial
stability, money-laundering and competition.
In the midst of this criticism, however, was the apparent
realisation that tokenised payment systems build on blockchain technology could
perform exactly as Libra proposed. French minister Bruno Le Maire asserted
that, whilst Libra was a "threat to national sovereignty", EU member
states should consider how to create their own digital currencies. The Chinese
central bank was equally transparent in its analysis: Libra was a US attempt to
extend the Dollar's hegemony as the world's reserve currency to the digital
domain, and so should be pre-empted by China's own 'central bank digital
In the world of monetary policy and international financial
regulation, a key issue in financial services and legal trends guises, 2020 may be the year in which either private cryptocurrencies
become a significant force in financial infrastructure. But it may also be the
year that governments and regulators, including the Bank of England, develop
payment tokens and transfer system to exist independently to the banking
system. It's currently unclear which outcome will transpire, but the current
frequency of regulatory publications on this area suggests that major change
could take place.
Free trials are only available to individuals based in the UK
* denotes a required field
Rory is a solicitor in the Financial Regulation team at Pinsent Masons LLP, with personal academic interests in private, public and international law approaches to emerging financial technologies.
0330 161 1234