We want the UK’s payment systems to serve the diverse needs of businesses and consumers for many years to come.
That’s why we are closely monitoring the development and delivery of the New Payments Architecture (NPA) - the UK payments industry’s proposed new way of organising the clearing and settlement of payments made from one payment account to another, known as interbank payments.
Whether paying employee wages, or transferring money to a friend using internet banking, interbank payments are a key part of everyday life for businesses and consumers alike. It’s vitally important that they run smoothly and rise to the challenges of the future.
Done well, the NPA has the potential to future-proof payment services in the UK by providing a robust and sustainable infrastructure where innovation and competition can thrive.
Who is responsible for delivering the NPA?
In 2015, we set up the cross-industry Payments Strategy Forum to identify, prioritise and help to deliver initiatives where it is necessary for the payments industry to work together to promote collaborative innovation.
The Forum published recommendations which included consolidating the operators of Bacs, Cheque and Credit (C&C), and Faster Payments (FPS). In addition, the strategy proposed the creation of a New Payments Architecture (NPA).
We then set up the Payment System Operator Delivery Group (PSODG) with the Bank of England in October 2016 to consider key issues relating to the potential consolidation.
The PSODG published a report in May 2017 setting out its recommendations on the key characteristics of a proposed New Payment System Operator (NPSO), with the NPA as one of its core deliverables.
The NPSO became Pay.UK in October 2018 and operates as a not-for-profit company limited by guarantee. It is responsible for delivering the NPA.
What is our role?
The NPA is one of the biggest changes happening in UK payments and the role of the PSR is vital in making sure this change works well for people and businesses.
Alongside the Bank of England, we are monitoring Pay.UK’s work throughout the development of the NPA. Together we’re working to ensure that the NPA is resilient and takes account of and promotes good outcomes for all users. We will also continue to consider whether we need to use our powers, both in the short and long term, to ensure it delivers the intended long-term benefits.
In January 2020 we issued a call for input, asking for stakeholders’ views on issues that could affect competition and innovation in the NPA. This followed our work setting out our expectations and thinking about the development of the NPA, which we summarised in open letters to Pay.UK in 2018 and 2019. These covered risk, competition, innovation, rules and standards, governance and decision-making, and stakeholder engagement.
In February 2021, we published a consultation on delivery and regulation of the NPA setting out:
- options for reducing risks to the successful delivery of the NPA, which we considered to be unacceptably high
- proposals to mitigate risks to competition and innovation relating to when the NPA is operational
In July 2021, we published a paper setting out our decisions for reducing risks to NPA delivery.
We decided that Pay.UK should phase the development of the NPA by narrowing the scope of the NPA central infrastructure services (CIS) contract. Pay.UK must secure this contract through a competitive tender.
To implement these decisions, we consulted on giving directions – Specific Directions (SDs) 2a and 3a – varying SDs 2 and 3. In December 2021, we set out our decisions on the changes we made to SDs 2 and 3 following our consultation and gave SDs 2a and 3a to Pay.UK. SDs 2a and 3a come into force on 1 January 2022.
In December 2021 we published our regulatory framework for the NPA CIS which sets out requirements on both Pay.UK and a CIS provider that will address risks to competition and innovation in the NPA ecosystem arising from the behaviour of a provider appointed to deliver CIS. We also published illustrative directions to show how the framework could be implemented.
What will the NPA look like?
The Forum proposed creating a new payments architecture – the NPA – to replace the architecture used for today’s UK retail interbank payment systems (Bacs and Faster Payments).
It is envisaged that clearing and settlement of payments will take place over a single purpose-built central infrastructure rather than the separate infrastructure that is currently used.