NPA: An appropriate time to consider a reset?

Issue 549 | 23 November 2023

Future of Payments Review: Through a NPA lens

Yesterday’s Payments:Unpacked the UK sprinted ahead but is starting to flag provided a very high level summary of Joe Garner’s “Future of Payments Review.”

For those readers that have a particular interest in the UK’s planned New Payments Architecture (NPA) you may recall that the review’s Terms of Reference included a section relating to the NPA:

The Review should take into account developments in the UK payments industry’s NPA, which is being procured by Pay.UK, and may make recommendations building from (not replacing) NPA plans.

This newsletter explores how the review has taken into account developments in the NPA and the conclusions the review arrived at.

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A congested roadmap

When looking at the in-flight plans and initiates across the payments landscape and considering how likely these plans are to deliver world leading payment journeys for UK consumers the report concluded that:

The roadmap is congested with multiple major initiatives in flight, led from different parts of the landscape.

The potentially highest impact initiatives over the coming years are Open Banking, New Payments Architecture (NPA) and (if introduced) Central Bank Digital Currency.

UK Finance estimate that the total cost to deliver the Payments roadmap over the next 5 years is between £10bn and £20bn, and that firms estimate that 91% of their allocated budgets are allocated to regulatory projects.

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Absence of a North Star

When considering the long term future or desired end state of the payment landscape the report concluded that there is no evidence of a clear and agreed vision:

…more than any other part of financial services, payments suffers from the lack of a North Star.

And the FCA Panel said:

The Panel is unconvinced that the plethora of disjointed initiatives currently underway will deliver the desired outcome – however well-intentioned each one might be.

This lead the report to conclude that in the absence of a clear vision or North Star for UK payments, it is hard to be confident that the long list of activity (including the NPA) will add up to world leading consumer journeys over the long term.

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PayM2

The report considered leveraging Open Banking in an attempt to build a new user experience in front of Faster Payments (PayM2). This could use an alias or proxy such as mobile number to replace account details as per Sweden, Brazil, India and increasingly others.

However the report concludes that whilst this might sound attractive the disadvantages are:

• it would layer an incremental major initiative on top of an already overloaded roadmap

• based on Brazil's experience, it would take minimum 2.5 years to deploy

And in the content of the NPA:

• it could add to the NPA deployment complexity and cost.

The report concludes that given the UK is in the lead in terms of the technical development of Open Banking APIs, therefore it makes more sense to focus on finishing what we have started and building out the existing capabilities further.

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Variable confidence in a timely and successful delivery of NPA

The report states that the NPA attracted more comments from stakeholders than any other single theme, apart from fraud.

The terms of reference for Future of Payments review were very specific:

The Review should take into account developments in the UK payments industry’s NPA, which is being procured by Pay.UK, and may make recommendations building from (not replacing) NPA plans.

Given the importance of the NPA (or a npa?) it is not surprising that 58% of respondents to the review mentioned the NPA.