New Payments Architecture: It's been a while
Issue 598: 16 April 2024
It’s been a while
Recently there has not been a lot to write about the UK’s proposed New Payments Architecture (NPA) - indeed it felt that the NPA was skipped over in the Payment Systems Regulator’s (PSR) 2024/25 annual plan.
The proposed New Payments Architecture has been a ‘thing’ for seven years when the Payment Strategy Forum delivered its blueprint outlining a new retail payments infrastructure for the UK and it has been six years since Pay.UK was created.
Over this time the scope of the NPA has deviated from its original design and despite a long procurement period a NPA vendor has yet to be announced.
Pause and Reset
In late 2023 the HM Treasury’s Future of Payments Review called for a NPA programme reset. The HM Treasury commissioned review referenced aspects of the NPA programme:
“…..the design assumptions made in 2017 do not reflect current trends and are less likely to do so in 2026 {the planned deployment date}.
58% of respondents to the review mentioned the NPA and of these mentions, 36% were positive, 24% were neutral and 40% were negative.
At interview contributors were more forthright, with verbatims across a wide diversity of stakeholders describing progress in emotive terms.
The review observed that confidence in a timely and successful delivery of NPA appears variable at best.
And then over the past week two key insights to the way forward have been announced:
Aidene Walsh Speech for Innovate Finance Global Summit
Earlier this week Aidene Walsh’s gave a speech at the Innovate Finance Global Summit (IFGS) in London and on Faster Payments Aidene said that Faster Payments is dated:
We led the world on Faster Payments. But that infrastructure is now dated. To support sustainable innovation, our infrastructure must support the functionality needed for new and existing methods of payments. This is an important agenda.
We have written to Pay.UK to engage it on its plans for the further investment needed in Faster Payments – including the potential to deliver upgrades to deliver the capabilities needed to support the next developments on open banking and retail payments.
Aidene Walsh, Chair, Payment Systems Regulator
Whether you a Chadwick, a Bazalgette or a Bazalwick, back in December 2023 I wrote:
For the good of real time payments, to support the rise of Open Banking (A2A, VRP and Request to Pay) lets stop talking and begin doing - fast tracking the development of Faster Payments 2.0 would be a good start!
Mike Chambers, Payments:Unpacked
Open Letter to Pay.UK
The PSR’s speech at the IFGS event was preceded by a Open Letter to Pay.UK which was published by the PSR just a few days earlier.
Introducing the Open Letter sent to Pay.UK the PSR stated that since its previous open letter sent in September 2023:
regulatory processes remain ongoing;
the Government announced that it will consider the role of the NPA as part of the National Payments Vision;
in response, Pay.UK has paused the programme.
This has led to a significant delay to the earliest date by which Faster Payments Scheme (FPS) would be replaced.
The PSR acknowledged that FPS will now be operational for longer than originally expected and, reflecting this, the PSR have asked Pay.UK to provide the regulator with information that will inform the regulators approach to investment in the current FPS system.
The PSR have also concluded that this delay also means that they will need to consider the implications for the Specific Direction 3 deadline of 1 July 2026, and that they will be continuing to engage with Pay.UK on this matter.
The key points in the PSR’s Open Letter to the Pay.UK are:
…payment markets are not standing still and we need to progress with investment that supports the economy, payment users and competition in payment markets.
….events have led to a significant delay in FPS migration and that FPS will likely be operational for significantly longer than originally envisaged.
….many customers (aka scheme participants) have released their change resources for 2024 and need to understand a way forward soon in order to secure resources for 2025.
…Pay.UK should begin discussions with Vocalink at the earliest opportunity to determine an appropriate scope and cost for the following:
Required additional resilience-related investment needed for FPS; and
Potential options for increased capability that might now be justified. We would expect that you would consider the potential for upgrades to deliver additional capabilities identified by the PSR (for example in our work on Open Banking), the capabilities and benefits envisaged as part of the NPA programme and any other outcomes identified more recently.
Given Pay.UK’s role as a Payments System Operator the PSR have asked Pay.UK to provide them with:
Key milestones (and timings) for the items set out in the Open Letter
Pay.UK’s initial view on the likely scope and costs of the items set out in the Open Letter
Pay.UK’s view on the impact of this request on procurement of a new Central Infrastructure as recommended by the Payments Strategy Forum
Pay.UK’s view on the likely industry reaction.
In addition the PSR acknowledge that the consequences that flow from this delay are likely to impact Pay.UK’s ability to meet its Specific Direction 3 deadline of 1 July 2026 and plan to engage with Pay.Uk on these consequences.
Short Term Actions
The PSR are keen to stress that the Open Letter focusses on short term actions which should not prejudice the anticipated vision for payments or any other aspects of the PSR’s policies.
These should be considered short term actions which do not prejudice the findings of the National Payments Vision or any PSR policy in the longer term, including in respect of the ongoing tender or other aspects of the PSR’s NPA policy.
PSR’s Open Letter to Pay.UK
Watch this space to see where this leads the UK in its quest for a modern real time retail payments infrastructure……..