UK Banks Explore Domestic Card Network Alternative

- The project, with a working title of DeliveryCo, is a collaborative effort involving major UK financial institutions such as Barclays, Lloyds, NatWest, Santander, and Nationwide. The Bank of England is expected to contribute to the infrastructure design, and the initiative is backed by the UK government. - This move is driven by concerns over geopolitical risks, such as the potential for US sanctions or technical failures to disrupt the UK economy, as seen in Russia. The aim is to create a "sovereign payments system" to ensure the continuity of transactions. - The new network is not intended to completely replace Visa and Mastercard but to act as a "resilience measure" or an "additional payment rail". Interestingly, both Visa and Mastercard are reportedly involved in the discussions as stakeholders in the new funding group. - This initiative is part of a broader trend towards financial sovereignty, mirroring efforts in the European Union with its European Payments Initiative (EPI), which aims to create a unified digital payment system for Europe. India's RuPay network is another example of a successful domestic card scheme created to reduce reliance on international networks. - The proposed system is expected to be operational by the end of the decade, around 2030. - While Open Banking payments are growing in the UK, they are not yet considered a direct substitute for card networks, with transaction volumes remaining a fraction of card payments in 2024. - The UK previously had a domestic debit card scheme called Switch, which was launched in 1988 by several major banks. Over time, it was replaced by the Maestro and then Visa and Mastercard debit card systems. - This development is taking place within the context of the UK's "New Payments Architecture" (NPA), a broader initiative to modernize the country's interbank payment systems.