PSF Blueprint puts flesh on bones of Strategy for new UK payments system

The Payments Strategy Forum has published a consultation paper, 'Blueprint for the Future of UK Payments', building on its November 2016 Strategy.  It contains more concrete proposals for the design, governance and development timetable for the proposed New Payments Architecture (NPA).  Existing and new payments market players alike should sit up and take notice of these latest proposals and the likely impact on existing or planned technical builds.

Blueprint foundations

Key elements of the proposals in the Blueprint include:

Layering, flexibility and agility for competition and innovation

The PSF looks to create a collaborative core infrastructure that PSPs can layer their own payment solutions on top of.  The aim is to provide a robust base that will facilitate competition and innovation within the layers.  Flexibility to support a range of new end user overlay services such as Request to Pay and Assurance Data (including Confirmation of Payee), as well as the ability to launch such new services quickly, is also at the core of the design proposals.

New central governance

The current frameworks for BACS, Faster Payments and Cheque and Credit Clearing would be replaced by a new central governance structure, underpinned by a single set of standards and rules.

In accordance with another major element of the 2016 Strategy - the proposal for the consolidation of the three main UK retail Payment System Operators into a New Payment System Operator (NPSO) - the NPSO will be the central body that governs the NPA, including setting the standards and rules and for technical considerations such as security. It will also have responsibility for: registration and certification of overlay service providers; defining and maintaining the standards for operation of the NPA.

ISO 20022 to be king

The Blueprint envisages the adoption of the common, international messaging standard ISO 20022 to enable access, innovation and interoperability, both in the UK and potentially for international connectivity.

Customers in the (payments) driving seat

Customers will have more control of execution, including timing, of payments by making all payments "push" payments, rather than the current mix between "pull" payments such as direct debit via BACS, and push payments, such as via Faster Payments.

'Improving Trust in Payments' – Customer data proposals

The consultation paper also endorses the idea of sharing customer data for anti-money laundering purposes and proposes the establishment of a data sharing framework as part of its ‘Trusted KYC Data Sharing’ solution.

Another solution relating to trust in payments which the PSF committed to consult on in its Strategy is ‘Payments Transaction Data Sharing and Data Analytics’. This proposes the deployment of an analytics capability with access to UK payments data to identify criminal money flows between accounts; the Blueprint looks at a solution that combines with other information (for example, known fraudulent accounts and suspicious activity reports (SARs)).

Supporting papers that contain more background information on this and the other core aspects of the Blueprint are available here.


What's the impact?

All players, including new banks and other PSPs who have been or who are planning their technical builds, will need to take into account the timing of the development; and transitional arrangements will be vital in ensuring no gaps.  Other payment systems, such as the card schemes, will also need to react to this strategic development.


How will this fit in with other major change programmes such as PSD2?

The PSF acknowledges that a number of related major change programmes for the payments industry are already underway, including work on Open Banking APIs, PSD2 and the Bank of England's work to deliver a new Real Time Gross Settlement (RTGS) system.  It states that its proposed implementation approach for the NPA 'seeks to leverage and align with these programmes where possible' as well as identifying and managing the 'risks related to concurrently delivering significant change across the industry'.  Transitional arrangements will allow 'dual running' of current systems with the NPA, allowing current participants and users to move to the NPA over time.


What's the timescale for all this?

The proposal is to implement the NPA over 5 years, with the first implementation of a push payment capability available at the beginning of 2021.

The NPSO will be taking ownership of NPA design and implementation at the end of 2017.

Timing may well be of the essence to preserve the UK payments market's competitive edge as a global payments leader; Australia is due to launch a similar structure this year.

Implementation of the ‘Trusted KYC Data Sharing’ and ‘Payments Transaction Data Sharing and Data Analytics’ solutions would run to a different timetable, with the first solutions going live during 2020.


Next steps

The PSF is running a Consultation Briefing Session in London on 5 September 2017. You can register to attend via this dedicated webpage.

The consultation closes on 22 September 2017.  The final form Blueprint will reflect relevant feedback and the PSF expects to complete its consultation assessment in late November.

For more information on the PSF's Strategy, take a look at our previous FIsion blog post, 'Unlocking competition and innovation in payments - PSF publishes final Strategy'.

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