UK Fintech Firms Urge Faster Payments Reform in Spring Budget

Introduction

Fintech companies across the United Kingdom are calling on the government to prioritize payments reform in the upcoming Spring Budget. With the global financial technology sector evolving rapidly, British firms warn that outdated regulatory frameworks and slow payment infrastructure are undermining innovation and competitiveness.

The UK has long been a pioneer in financial technology, but many leaders now argue that progress is at risk without targeted policy support. They are urging the Treasury and the Bank of England to modernize the Faster Payments system, improve interoperability, and provide clearer rules for digital finance. These reforms, they argue, are essential to maintain London’s reputation as a global fintech hub and to enhance financial inclusion across the country.

Calls for Modernization

At the center of the debate is the Faster Payments system, the backbone of the UK’s real-time payment network. Introduced in 2008, it was once a global benchmark for speed and reliability. However, as transaction volumes have surged and fintech applications have grown more complex, the system’s limitations have become apparent.

Industry leaders are pressing for a comprehensive upgrade that can support instant payments for both individuals and businesses. They want the system to accommodate new forms of digital identity verification, improved fraud detection, and greater compatibility with global payment rails. The goal is to make cross-border transfers as seamless as domestic ones, reflecting the reality of an increasingly digital and interconnected economy.

Several fintech associations, including Innovate Finance and the Payments Association, have submitted formal recommendations to the Treasury. Their proposals emphasize investment in real-time settlement technology, open banking expansion, and stronger collaboration between banks, fintechs, and regulators.

Government Priorities and Policy Context

The Treasury has acknowledged that payments modernization is a priority, but progress has been slow. The Payment Systems Regulator and the Bank of England have launched consultations on the future of Faster Payments and the planned New Payments Architecture, a long-term project designed to replace the existing infrastructure.

Chancellor of the Exchequer Jeremy Hunt has hinted that the upcoming budget will include measures to promote financial innovation and competitiveness. However, fintech executives argue that recent commitments have been too broad and lack timelines. They seek tangible steps such as clearer regulatory guidance for open banking, streamlined approval processes for payment institutions, and targeted incentives for infrastructure investment.

The Bank of England’s role will also be central. It manages the Real-Time Gross Settlement system, which underpins payment clearing in the UK. Fintech firms are asking the Bank to improve access for smaller institutions and non-bank providers. Broader access, they say, would encourage competition and reduce costs for consumers and businesses.

Industry Frustrations

Many in the fintech community feel that regulatory caution has slowed innovation. Startups developing digital wallets, payment apps, and cross-border platforms often face long approval times. They argue that regulators focus too heavily on risk management at the expense of agility.

Industry figures cite other jurisdictions such as Singapore and the European Union, where streamlined digital finance frameworks have accelerated innovation. The UK’s early leadership in open banking is at risk, they say, unless policymakers act swiftly to extend its reach. The transition from open banking to open finance, which would include investments, pensions, and insurance, remains incomplete.

These concerns were reflected in recent surveys by trade groups showing that more than half of fintech founders view regulatory delays as their primary growth obstacle. For smaller firms, the administrative burden of compliance is particularly challenging.

Innovation and Competition

Reforming payments infrastructure is not just a technical issue but also a strategic one. Fintech advocates argue that modern, interoperable systems would foster competition and attract international investment. The UK’s financial ecosystem includes more than 1,600 fintech firms, generating tens of thousands of jobs and billions in revenue.

Upgrading the payments framework would support innovation in areas such as instant payroll processing, small-business finance, and retail payments. It would also enhance transparency, security, and consumer protection. Experts point out that faster, safer transactions could reduce fraud losses, which now exceed £1 billion annually.

The move toward digital currencies and blockchain-based settlements adds another dimension. The Bank of England is exploring a potential digital pound, and fintech companies believe payments reform should align with this work. They want a system flexible enough to integrate central bank digital currency technologies when they are introduced.

Opportunities in Open Banking

Open banking remains a cornerstone of fintech innovation. It allows consumers to share their financial data securely with third-party providers, enabling new services such as account aggregation, budgeting tools, and automated lending decisions. While adoption has grown, progress has slowed due to inconsistent implementation and limited access to advanced data types.

Fintech firms argue that the next phase, open finance, could unlock even greater value. Extending data sharing to savings, pensions, and investment accounts would allow firms to offer more personalized financial advice and integrated money management. However, these developments require updated regulatory frameworks and common technical standards.

Balancing Innovation and Security

Regulators face the challenge of promoting innovation while ensuring security and consumer protection. Fraud prevention remains a major concern as instant payments become more common. Fintech firms support the introduction of advanced identity verification tools, machine learning for fraud detection, and clearer rules on liability in cases of unauthorized transactions.

Some industry leaders have proposed a shared responsibility model where banks and fintechs collaborate to monitor and report suspicious activity. They emphasize that innovation and security are not conflicting goals but complementary ones that can enhance trust in digital payments.

International Comparisons

Globally, payments modernization is accelerating. The European Union’s SEPA Instant Credit Transfer scheme and Singapore’s PayNow network demonstrate the benefits of coordinated reform. Both systems support real-time transfers and interoperability across institutions.

The UK was once a leader in this area, but other countries have now overtaken it in speed, adoption, and regulatory clarity. To regain its edge, experts say the government must move beyond consultation toward implementation. The upcoming budget presents an opportunity to signal renewed commitment to digital financial infrastructure.

Conclusion

Fintech firms across the United Kingdom are united in their message: the time for incremental progress has passed. Modernizing payments is essential for maintaining competitiveness, supporting financial inclusion, and enabling the next generation of digital services.

The Spring Budget represents a critical moment for policymakers to demonstrate leadership. A clear roadmap for Faster Payments reform, expanded access to settlement systems, and strengthened open banking frameworks would send a strong signal to investors and innovators alike.

For the UK’s fintech sector, payments modernization is not just an economic goal but a statement of global ambition. With timely action, the government can ensure that Britain remains at the forefront of financial innovation in an increasingly digital world.