Tap, Click, Transfer: Is “Pay by Bank” the Quiet Open Finance Revolution at Last?

Posted on March 24, 2026 by bbatiz

A Quiet Surge in Adoption

How to pay securely online has been an ongoing concern since the advent of the commercial Internet in the late 1990s. Indeed, one of PayPal’s claims to fame (and success) was to allow users a single point where to keep the now familiar ritual: type in your card number, expiry date and CVV, hope the transaction goes through, and perhaps complete a two-factor authentication step. However, speaking recently on BBC Breakfast, fintech commentator Peter Ruddick noted that the UK has already seen growth of something rather different called Pay-by-Bank.

A Bit of Fintech History

In the UK, this new method roots to 2016 when The Competition and Markets Authority (CMA) mandated the creation of the Open Banking Implementation Entity (OBIE) following an investigation into retail banking competition. This was followed by The Retail Banking Market Investigation Order, which came into effect in 2017, legally requiring the UK’s then nine largest banks (the CMA9 – Barclays, Lloyds Banking Group, Santander, Danske, HSBC, RBS, Bank of Ireland, Nationwide, and AIBG ) to share data with authorised third parties.Open Banking was introduced the following year, in 2018, as the underlying regulatory framework and technology that enables an account-to-account payment method, while Pay by Bank is a specific consumer-facing payment method powered by that technology. In other words, Open Banking provides the “pipes” (APIs) and rules, while Pay by Bank is the specific “tap” you turn on at a digital checkout to use those pipes.

Ruddick and supporters of Open Banking claim that Pay by Bank represents a big change in how money moves online. Rather than routing funds through card networks, acquirers, or intermediary wallets, it allows instant settlement straight from a consumer’s bank account to a merchant’s. No card details are entered, no CVV typed, no extra layers of friction added for security. Ruddick noted that in the UK, Pay by Bank has gained quite momentum with around 36 million Pay-by-Bank transactions in 2026 alone.

The UK Payments Landscape: Perspective Matters

Industry insiders would opine that new technologies like instant payments and Open Banking rails are slashing costs dramatically. As seen in Keyna’s MPesa, Brazil’s PIX or India’s UPI, where cash reliance has diminished not through mandates but through usable, low-friction alternatives.

Recent figures underscore this perception. See Table 1 below. Open banking payments reached around 351 million in 2025 in the UK, a substantial rise from prior years, with variable recurring payments (a key subset) now forming roughly 16% of the total. Early 2026 data shows a continued upward trajectory, albeit at a steadier pace—monthly volumes hovering near or above 30 million in recent periods, supported by major platforms like Amazon and eBay integrating the option. Awareness of the term “Pay by Bank” has paradoxically dipped among consumers, dropping to about 38% familiarity in recent surveys despite the volume surge, reflecting terminology confusion (“instant bank transfer,” “account-to-account,” and so on) rather than rejection.

Table 1: Distribution of Payment Methods in the UK, 2025

To place this data in context, consider the broader UK payments picture. Debit cards still dominate with roughly 26 billion transactions annually, capturing over half the market share. Faster Payments, the underlying infrastructure for many Pay by Bank flows, handles around 5-6 billion. Direct Debits underpin recurring needs at nearly 5 billion, while cash lingers at about 4-5 billion despite its decline. Open banking payments, even at their 2025 level of 351 million, represent only a small fraction—around 0.7% of the total non-cash volume—but their growth rate stands out as the fastest among established methods: 57% year-on-year growth, nearly one million new users per month and record monthly volumes exceeding 14 million transactions.

The Invisible Economics of Payments

The appeal of Pay by Bank lies in simplicity and economics: no card details to steal, near-instant settlement, lower merchant fees than card rails (often 1-2% versus higher interchange), and reduced fraud surface. Yet the deeper issue is not technical capability but economic visibility.

One of the longstanding truths in retail payments and one rarely discussed aspect of this industry: pricing transparency. Consumers tend to assume all payment methods cost roughly the same. In reality, they do not. Payments other than cash or direct transfer involve multiple actors: issuing banks, acquiring banks, card networks, payment gateways, and digital wallets. Each layer extracts a fee.

Account-to-account payments, by contrast, typically involve no intermediaries and lower ot no transaction costs. Yet consumers rarely see those savings reflected in checkout decisions. Consumers choose based on convenience, perceived liquidity, or the allure of deferred payment. Behavioural evidence consistently shows people favour options that push costs into the future, even if subtly embedded in higher retail prices.

This creates a tension. If a merchant can offer six interest-free instalments via BNPL, is that unambiguously good for the consumer? It depends on individual time preferences and discipline, but the decision is seldom fully informed—the true cost is diffused across the system rather than signalled clearly at the point of choice. Pay by Bank could, in theory, alter this dynamic. Fewer intermediaries mean lower fees for merchants, which could translate into explicit price differences or incentives to steer customers toward the cheaper rail. In practice, though, merchants hesitate to highlight such savings, and consumers show little appetite for switching purely on abstract efficiency grounds.

Forecast: Where Pay by Bank Could Go Next

Looking ahead, projections suggest steady if unspectacular scaling. From the 2025 base, volumes could approach 900 million by 2027 as e-commerce integrations deepen, perhaps reaching 2 billion by 2030 when merchant steering becomes more common, and potentially 5 billion by the mid-2030s—around 10% share—if open finance matures, APIs standardise further, and protections align closer to card-level safeguards. These estimates hinge on stronger incentives and regulatory parity; without them, the method risks remaining a niche convenience rather than a conscious preference.

Why is there no regulatory parity? Pay by Bank lacks the legal protections of credit cards because it is classified as a bank transfer or cash payment rather than a credit agreement, meaning it is not covered by Section 75 of the Consumer Credit Act 1974. Additionally, unlike debit and credit cards, which follow voluntary chargeback rules set by networks like Visa and Mastercard, Pay by Bank transactions are direct Faster Payments that do not currently have a built-in reversal or dispute mechanism.

Table 2. Pay by Bank Forecast 2025-2030

Card schemes triumphed not on lowest cost but on trust—chargebacks, fraud liability shifts, straightforward disputes and, of course, “no discrimination” clauses. Pay by Bank excels at efficiency but must still prove equivalent consumer protections to gain similar confidence. Meanwhile, global examples remind us that innovation thrives when it delivers usability and immediacy, not merely lower abstract fees.

Ultimately, Pay by Bank’s promise extends beyond reducing friction. It offers a chance to make the economics of payment visible again—to let price signals guide choices amongst payment media rather than opaque intermediation. Until merchants and regulators foster that transparency, the option will likely keep growing quietly: useful for those who discover it, but for most, just another button among many, convenient yet unexamined. The quiet revolution may yet reshape the infrastructure of exchange, but only if it succeeds in illuminating the costs hidden within it.

From Chip and PIN to “Payment Sovereignty”: Why Britain’s Card Revolution Is Entering a New Political Phase

Posted on February 19, 2026 by bbatiz

In February 2006, millions of Britons stood awkwardly at supermarket tills, unsure whether they remembered a four-digit code they had barely used before. Chip and PIN had arrived, replacing signatures and ushering in a new era of electronic payments. Two decades later, the technology is so embedded that it feels invisible. Yet, beneath the surface of taps and swipes, Britain’s payment system is entering another transformation—this time driven less by convenience and more by geopolitics and power.

The humble PIN pad was never just about fraud reduction or retail efficiency. It was part of a longer story about who controls the pipes of commerce. Today, as UK banks explore a domestic alternative to Visa and Mastercard, the country is rediscovering that payment rails are not merely commercial services—they are strategic infrastructure.

A historical lesson from Barclays: CONNECT, Switch, and the politics of payments

British banks have been here before. In the 1980s, Barclays launched CONNECT, one of Europe’s earliest online banking systems, offering account access through home computers and modems. CONNECT was not just a technological novelty; it was an attempt to shape how consumers interacted with banks, bypassing physical branches and creating proprietary digital channels.

Around the same period, UK banks collaborated on Switch, a domestic debit card scheme that later evolved into Maestro and then Visa Debit. Switch represented a rare moment of collective industry coordination to build a national payments infrastructure rather than rely entirely on global networks.

These initiatives reveal a recurrent pattern: payments innovation is always political, even when framed as neutral technology. CONNECT challenged the dominance of physical branch networks; Switch was an assertion of domestic control in a rapidly globalising card market. The current push for a UK alternative to Visa and Mastercard is simply the latest chapter.

Chip and PIN: the quiet infrastructure revolution

Chip and PIN itself was a geopolitical technology, even if consumers barely noticed. The system was introduced partly to combat card-present fraud and magnetic stripe cloning. Two decades on, it has dramatically reshaped how people pay, reducing counterfeit fraud by around 95% and laying the foundation for contactless and mobile wallets.
See, for instance:
https://www.credit-connect.co.uk/news/chip-and-pin-hits-20-year-milestone/
and
https://uk.finance.yahoo.com/news/remarkable-changes-way-pay-20-000100721.html

But Chip and PIN also entrenched dependence on global card schemes. Visa and Mastercard now process roughly 95% of UK card transactions, a concentration that policymakers increasingly view as a systemic vulnerability.

Why banks are suddenly talking about “sovereign payments”

Recent reports suggest UK bank leaders are exploring a domestic alternative to Visa and Mastercard, prompted by concerns about geopolitical risk and systemic dependence.
For example, The Guardian reports that a coalition of banks, chaired by Barclays UK CEO Vim Maru, is considering a national payments platform to reduce reliance on US-owned networks and ensure resilience.
https://www.theguardian.com/business/2026/feb/16/uk-bank-bosses-plan-visa-mastercard-alternative

This is not about shaving a few basis points off interchange fees. It is about strategic autonomy. If payments are critical infrastructure—like electricity grids or telecommunications—then relying on foreign-controlled networks introduces geopolitical risk. The experience of sanctions on Russia demonstrated how quickly payment rails can become instruments of state power.

Barclays and the new platform logic

Barclays has been repositioning itself within the payments ecosystem for years. It has invested heavily in its merchant acquiring business, explored partnerships to spin it out as a standalone platform, and even entered stablecoin infrastructure experiments. These moves reflect a strategic shift: banks increasingly see themselves not just as intermediaries, but as platform orchestrators in a fragmented payments landscape.

For example, Barclays has partnered with Brookfield to transform its payment acceptance business into a scalable, independent platform, investing hundreds of millions of pounds to modernise the infrastructure.
https://www.ajbell.co.uk/news/articles/barclays-partner-brookfield-payment-acceptance-business

This platform logic mirrors CONNECT’s ambition four decades ago: control the interface between consumers, merchants, and financial infrastructure. The difference today is scale, complexity, and geopolitical salience.

The real policy question: interoperability versus sovereignty

The debate over a UK alternative to Visa and Mastercard echoes European discussions about payment sovereignty, such as the EU’s push for domestic schemes and digital wallets. The rhetoric is familiar: reduce dependence on US firms, protect domestic industry, and ensure resilience.

But history suggests that sovereignty without interoperability risks irrelevance. Switch succeeded partly because it integrated into global networks; CONNECT thrived only as long as it connected seamlessly with core banking systems. Payment systems are network goods: their value depends on widespread adoption and compatibility.

A purely national scheme that fails to interoperate with global platforms risks becoming a costly redundancy. Conversely, an interoperable domestic rail could increase competition, reduce fees, and enhance resilience.

From convenience to critical infrastructure

The evolution from signatures to Chip and PIN to contactless payments often appears as a linear story of consumer convenience. Yet each step also redistributed power among banks, card schemes, regulators, and technology firms.

The current push for a domestic payment alternative marks a shift from consumer-facing innovation to infrastructure politics. Payments are no longer just fintech; they are geopolitics.

For policymakers, three implications follow:

Treat payment rails as critical infrastructure. This requires regulatory oversight, resilience testing, and contingency planning akin to other systemic infrastructures.
Design for interoperability first. National schemes must integrate with global networks to avoid fragmentation and inefficiency.
Balance competition with coordination. The UK’s historical experience shows that collaborative industry platforms can succeed, but only with clear governance and regulatory frameworks.

Conclusion: a new phase of the payments revolution

Chip and PIN transformed how Britons paid for groceries. The next transformation will be less visible but more consequential. As banks and governments rediscover the strategic nature of payment infrastructure, debates over sovereignty, resilience, and platform power will intensify.

The irony is that the future of payments may look less like Silicon Valley disruption and more like the collective industry projects of the past—CONNECT, Switch, and now DeliveryCo. The technologies will be digital, tokenised, and AI-driven, but the underlying question remains unchanged: who controls the pipes of commerce?

In the age of cashless societies, payment systems are no longer just about convenience. They are about power.

Beyond Convenience: Why the Cash Debate Is About Resilience, Not Just Rights

Posted on May 9, 2025 by bbatiz

The idea that shops in the UK could be required to accept cash has sparked a diverse response across the political and media spectrum (see table below)—but one thing is clear: this isn’t just about protecting vulnerable people, though that in itself is reason enough.

It’s about ensuring that everyone retains the right to choose how they pay—whether with coins, cards, or a mobile tap. That choice is not a luxury. It’s a cornerstone of economic fairness.

But beyond fairness lies something far more strategic and which has been discussed in this blog before: resilience.

Photo by Alexander Grey on Unsplash

Over the past decade, the fragility of digital infrastructure has been laid bare again and again. As The Banker recently noted, digital payments, while convenient and dominant, are not invulnerable. From cyberattacks to grid failures, natural disasters to telco outages, the systems we increasingly rely on are not immune to shocks.

We’ve seen this globally:

In Canada, the Rogers telecom blackout paralysed card payments for millions—fuel stations and supermarkets turned people away unless they had cash.
In Sweden, IT outages forced supermarkets to go temporarily cash-only—a wake-up call in one of the world’s most digitised economies. The central bank has also been public on the need to keep some form of cash infrastructure.
In Mexico, after Hurricane Otis, the central bank activated “Plan Billetes” and airlifted currency to re-enable commerce in Acapulco.
Even here in the UK, the TSB IT meltdown left thousands unable to access their funds for days.

Cash, in every one of these cases, was the analogue safety net. When the digital failed, cash didn’t.

In Parliament, the Treasury Select Committee has called on ministers to consider a legal obligation for shops to accept cash. This isn’t radical—it’s rational. As The Times and The Guardian have pointed out, nearly three-quarters of the British public support such a move. Yet government ministers, including then Prime Minister Rishi Sunak, remain opposed, arguing that businesses should be free to refuse physical money if they choose.

That’s the wrong way to frame it.

This isn’t about resisting innovation. It’s about designing a payments system that can withstand shocks, not just when things go right, but especially when they go wrong. Rationalising the cash system makes sense. Forcing it into extinction? That’s not a cashless utopia. That’s a digital dystopia.

If we want a future-proof economy—fair, inclusive, and resilient—then preserving the ability to pay with cash isn’t optional. It’s essential.

Source / Stakeholder	Position on Mandating Cash	Rationale	Notes / Key Quotes
The Times	Supportive/Concerned	Warns against sleepwalking into a cashless society; highlights resilience and inclusion	“Risky to rely only on digital infrastructure”
The Guardian	Supportive	Emphasises impact on budgeting, especially during cost-of-living crisis	“71% of UK adults support making cash acceptance mandatory”
The Scottish Sun	Neutral/Opposed	Reports on government’s support for business discretion	Focuses on practicality for businesses
The Herald	Mixed	Experts in favour; others defend business freedom	“Cash is still vital for rural and older communities”
Treasury Select Committee	In favour	Cites social exclusion and system resilience	Calls for government to explore legal requirement
UK Government (Treasury, PM)	Opposed	Prefers to focus on access to cash, not mandating its use	“We’re not going to tell shops how to run their business”
Campaigners (e.g., PCA)	Strongly in favour	Sees cash refusal as discriminatory and economically exclusionary	“It’s a matter of rights, not just preferences”
Retailers & Business Groups	Mixed/Opposed	Want operational flexibility; cite cost and security of handling cash	“Digital payments are more efficient”
Public Opinion (YouGov)	In favour	71% support mandatory acceptance of cash	Rising concern about digital exclusion

Palm Reading for Payments: China’s Biometric Leap and the Legal Maze Ahead

Posted on May 7, 2025 by bbatiz

In May 2023, WeChat made headlines by introducing one of the first significant rollouts of palm-vein payment technology. Debuting in Beijing’s Daxing Airport Express line and several university dining halls in Shenzhen and Shanghai, WeChat Palm Pay allows users to pay simply by hovering their hand over a scanner. By the end of 2023, Tencent reported over ten thousand palm-scanning terminals had been installed across restaurants, vending machines, metro stations, and retail outlets in select Chinese cities.

Using near-infrared imaging to map the unique vein patterns beneath the skin, the system links this biometric profile to the user’s bank card within WeChat Pay. It promises a faster, more secure, and phone-free payment experience—and it’s already being used by millions of early adopters, particularly on university campuses and in high-traffic transit hubs.

Unlike facial recognition or fingerprint scanning, palm-vein technology is virtually impossible to spoof. The biological markers are internal and require live tissue, adding a significant layer of protection. Crucially, Tencent has claimed full tokenisation of users’ biometric data, converting sensitive information into secure, encrypted tokens that aren’t stored in raw form.

Legal Maze Ahead

While the technology signals just how far China is ahead in biometric payments, exporting this model is far from straightforward. In the United States, a fragmented regulatory environment presents immediate challenges. States like Illinois enforce strict biometric privacy laws, with real risks of class-action lawsuits if consent protocols are mishandled. There’s no overarching federal framework, so a nationwide rollout looks unlikely.

Across the pond in the United Kingdom and the European Union, palm-vein data is treated as “special category” personal data under the UK GDPR and EU GDPR, requiring explicit consent and tight usage boundaries. Public deployments in schools, transport, or workplaces could face heavy scrutiny from data protection authorities. Past controversies over facial recognition have already hardened public opinion and regulator watchfulness.

Mexico sits somewhere between. Its data law treats biometrics as sensitive, and the national privacy authority, INAI, demands rigorous consent and data handling standards. For fintechs and payment providers, compliance with both financial regulators and privacy authorities will be essential. That said, if local data storage and inclusive benefits are emphasised, the government may prove more open to pilot schemes.

Palm payments may be seamless in Shenzhen, but the path to global adoption is anything but. From biometric consent and data localisation to legal liability and cultural attitudes, the future of palm technology will be shaped as much by regulators as by engineers.

Who will raise their hand next?

Region	Biometric Data Category	Consent Required?	Main Barrier
USA	Varies by state	Often Yes	Fragmented state laws & lawsuits
UK	Special category (UK GDPR)	Yes	ICO oversight & public concerns
EU	Special category (GDPR)	Yes	Strict GDPR + data transfers
Mexico	Sensitive data (LFPDPPP)	Yes	Fintech law + privacy enforcement

When Digital Fails: Why Cash Still Matters in a Resilient Payments Ecosystem

Posted on April 30, 2025 by bbatiz

As regulators, fintechs, and central banks inch or giant-leap towards the ideal of a “cashless society”, the conversation has rightly focused on consumer choice while conveniently side-stepped issues of cost transparency. But beyond these valid points lies a more fundamental issue: resilience.

The digital payments infrastructure that underpins modern commerce is efficient—until it isn’t. It has been designed to support far higher volumes than cash ever could. In countries like the UK, discussions around orderly rationalisation of cash infrastructure have acknowledged this reality. But to leap from rationalisation to obsolescence is not just risky—it’s misguided.

A recent post by Graham Mott (link), of the payments clearing house LINK in Linkedin, reminds us that resilience is not just about redundancy—it’s about preserving diversity in payment channels. John Howells, also of LINK (link) goes further, warning of a two-tier society in which those excluded from digital systems are left behind. Both are right—but this argument should extend beyond social access to systemic risk.

The past decade has provided compelling real-world examples where cash has proven essential when digital payments failed. These aren’t fringe cases—they span advanced, emerging, and developing economies:

1. India – Demonetisation (2016)

The rapid removal of high-value notes and a parallel push to digital platforms exposed huge infrastructure gaps, particularly in rural areas, where cash remained vital.

2. Puerto Rico – Hurricane Maria (2017)

The total collapse of power and internet left cash as the only operational means of exchange during recovery efforts.

3. United Kingdom – TSB IT Meltdown (2018)

Millions were locked out of digital services for days. The bank had to resort to manual distribution of cash and direct ATM support.

4. Sweden – IT Outages & Resilience Warnings (2021)

When supermarket tills failed, cash-only transactions became the norm. Sweden’s own civil contingencies agency has since advised households to keep cash on hand in case of cyberattacks or conflict.

5. Canada – Rogers Telecom Blackout (2022)

A national outage paralysed debit card systems and mobile networks. Many consumers found cash was the only option for fuel, food, and transport.

6. Mexico – Hurricane Otis in Acapulco (2023)

The destruction of digital infrastructure led monetary authorities to activate Plan Billetes, airlifting cash into the region to restore basic commerce and coordinate delivery with commercial banks (through mobile branches and ATMs) to ensure people could buy essentials.

7. Nigeria – Naira Redesign Crisis (2023)

A monetary policy shock and under-prepared digital infrastructure left millions without cash or functioning mobile payments. Long queues, protests, and informal exchanges ensued.

8. Spain & Europe – Power Grid Collapse (2025)

Electricity failures across parts of Spain, Portugal, and France knocked out payment systems. Authorities encouraged citizens to carry cash as mobile networks, card machines and ATMs went offline.

These are not hypothetical outlier cases—they are a feature of 21st-century economic life: almost one major event per annum during the last decade. This suggests that every advanced biometric, NFC-enabled, or tokenised payment product we build must have a failsafe that doesn’t rely on power, connectivity, or centralised databases.

Why should fintech care?

This isn’t about nostalgia or clinging to old systems. It’s about designing a truly antifragile ecosystem, where redundancy is built in and payment continuity is guaranteed in every scenario. Fintech innovators should view cash not as competition, but as a complementary anchor that underwrites trust in the system. Yet practitioners and regulators, particularly in South East Asia, have no plans for it…. risking getting caught with their pants down. There are, of course, other priorities for them, fueling super apps such as fiscal surveillance, for transactions to remain digital and the need to promote consumer expenditure.

Moreover, in a world of rising climate risk, cyber vulnerability, and geopolitical uncertainty, payment resilience will increasingly become a regulated feature, not a design afterthought. Startups and incumbent providers who build for interoperability with cash, especially in crisis response, could find themselves in a strategic sweet spot with governments, humanitarian agencies, and central banks.

In short, the utopia of a cashless future may sound sleek—but it risks turning into a dystopia of exclusion and fragility. Let’s not build a system so streamlined that it snaps when tested.

Rationalisation is sensible. Redundancy is essential. And resilience begins with respecting the role of cash.

Photo by Redd Francisco on Unsplash

Postscript

Chris Skinner has kindly pointed me to this interview of the Riksbank chief Erik Thedéen in The Banker, further arguing that “cash is the backup system for when digital goes down”.

Slow and Steady Wins the Race: ATMs, Tuvalu, and the Digital Dream

Posted on April 28, 2025 by bbatiz

Chapter 2 of Cash and Dash (Bátiz-Lazo, 2018) offers a timely reminder that major financial innovations often took years — even decades — to establish themselves. Far from being instant game-changers, technologies like the ATM spread unevenly, tangled in local infrastructure challenges, regulatory caution, and a general sense of “wait and see.”

First Adoption of Cash Machines in Selected Countries (1967-1980)

Source: Bátiz-Lazo (2018).

A perfect illustration comes from Tuvalu, which in April 2025 finally installed its first-ever cash machine (Campbell, 2025). It’s surprising, at first glance, to think that in a world obsessed with mobile payments and digital wallets, there are still places only now getting access to what many consider basic banking services. Yet it also perfectly captures the deeper lesson: the transition to a fully digital economy is far from complete.

While fintech headlines celebrate real-time transfers, crypto experiments, and cashless cities, Tuvalu’s story shows the reality for smaller, more remote economies. Cash remains critical. Infrastructure development cannot be skipped. And often, “old” technology like ATMs is still a vital stepping stone towards wider financial inclusion.

The tale of Tuvalu isn’t a tale of being left behind — it’s a glimpse into the diverse and uneven journey that global digital transformation must navigate. Chapter 2 of Cash and Dash reminds us that even the ATM, now seen as a legacy technology, once faced scepticism and delay. Innovation is not only about speed; it’s about building trust, access, and infrastructure in ways that work for real communities.

If Tuvalu is only now welcoming its first cash machine, imagine how much opportunity — and challenge — lies ahead for a truly cashless world.

Postcrip 30-04-2025
Got the following comment from a colleague after reading this entry, which helps clarify the late development:

Three ATMs were established in Tuvalu as part of their disaster risk management programme following Cyclone Tino in 2020 following my advice to UNDP and the UN’s Global Cash Working Group. Interestingly, they are also configured to accept tokens, paper vouchers and bitcoin though only dispense physical currency. This policy is slowly being implemented across Polynesia, including in Vanuatu and Fifi.

Location of Tuvalu – Wikipedia commons.

References

Campbell, P. (2025, April 16). Tuvalu gets its first ATM cash machine for banking. The Guardian. https://www.theguardian.com/world/2025/apr/16/tuvalu-first-atm-cash-machine-banking

Bátiz-Lazo, B. (2018). Cash and Dash: How ATMs and Computers Changed Banking. Oxford University Press.

From Spaghetti to the Finternet: A Decade of Thinking About Payment Hub Futures

Posted on April 21, 2025 by bbatiz

Over a decade ago, in 2014, Fabian Markert published a paper, while modest in its scope, it offered a clear-headed analysis of the tangle that plagued banks’ internal payment architectures. Writing at the height of SEPA implementation, Markert described a world in which banks had grown up with scattered, legacy-based systems—so-called “spaghetti” architectures—that were expensive to maintain and increasingly ill-suited to a competitive European payment environment. His solution was the payment hub: a centralised structure that would allow financial institutions to untangle their systems, improve operational efficiency, and remain competitive in a world where margins on traditional payments were shrinking.

Fast forward to 2024, and Agustín Carstens, together with Nandan Nilekani, has co-authored a far more ambitious proposal under the auspices of the Bank for International Settlements. In Finternet: The Financial System for the Future, the authors sketch a vision not simply of a better bank infrastructure, but of a wholesale reimagining of the financial system as a “Finternet”—a decentralised, interoperable ecosystem where financial actors, including central banks, commercial banks, fintechs and individuals, interact through tokenised, programmable digital infrastructures. Unified ledgers and embedded policy tools are at the heart of this new model, with a strong emphasis on user-centricity, inclusion, and seamless integration of digital financial services.

There is, of course, a significant difference in tone and scale. Markert was writing in the language of process efficiency and IT alignment—his audience was the operational leadership within banks. His was a managerial, almost surgical intervention to streamline and future-proof internal systems. Carstens and Nilekani, by contrast, offer a normative, policy-oriented framework aimed at central banks and public-sector stakeholders. Their concern is not just with improving what exists, but with enabling a leap forward—a system that is programmable, inclusive, and digitally native from the ground up.

And yet, beneath the surface, both proposals speak to a common concern: the limits of legacy infrastructure in a world that demands speed, reliability and adaptability. Both recognise that meaningful innovation in the payment space depends not only on new technologies but on rethinking governance structures and system design principles. Both are also motivated by external pressures—Markert by SEPA-induced competition and collapsing fee margins, Carstens by the urgent need to integrate digital public infrastructure with financial services.

In our own reflections here on the Cashless Society blog, we’ve long argued that innovation in payment systems often comes not from the glittering promises of new technology alone, but from the careful work of redesigning the systems that underpin them. Whether it’s the creation of India’s UPI, the rise of soft infrastructure like QR code standards, or the role of central banks in convening cross-border payment solutions, these developments suggest that architecture matters. What Markert and Carstens share, despite their distance in tone and ambition, is an understanding that how we design the plumbing of the financial system ultimately shapes who benefits from it.

It’s easy to get swept up in the grand vision of a Finternet. But perhaps its future success still depends on solving the very problem Markert diagnosed a decade ago: how to move from tangled wires to intelligent flows.

References

Carstens, A., & Nilekani, N. (2024). Finternet: The financial system for the future. BIS Working Papers, 1178. Bank for International Settlements. https://www.bis.org/publ/work1178.htm

Markert, C. (2014) Establishing Payment Hubs—Unwind the Spaghetti?. American Journal of Industrial and Business Management, 4, 175-181. doi: 10.4236/ajibm.2014.44024.

Photo Credit

Spaghetti Junction Birmingham

Creator: Central Press | Credit: Getty Images

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