Last updated: 21/09/2023
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.
A history of some of the key action we have taken over recent years can be found below.
In September 2023, the PSR Board agreed that Pay.UK has provided sufficient assurance at this stage to continue with its NPA programme plans.
We published our letter to Pay.UK setting out the result of the latest assurance point.
In March 2023, we confirmed our non-objection to Pay.UK’s procurement of ‘additional functionality’ in its NPA Central Infrastructure Services.
We have considered Pay.UK’s proposals and have decided not to object to the inclusion of the additional functionality.
SDs 2a and 3a came into force on 1 January 2022.
We set out our decision on the changes we made to SDs 2 and 3 following our consultation and gave SDs 2a and 3a to Pay.UK.
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.
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.
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
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.
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.
This platform will be designed in a way that allows new and existing payment service companies to develop services that benefit consumers and businesses using the system. This will help make the UK’s retail interbank payments ready for the future as payments technology and people’s habits continue to evolve.
We want to see the NPA delivered in a way that drives innovation and competition in payment systems and benefits everyone - from big banks and retailers to local merchants and high-street shoppers. This can be done by boosting competition between existing and new payments services as well as enhancing resilience and security in payments.
We will continue to monitor Pay.UK’s work to deliver the NPA – and use our powers, where appropriate – to assure an outcome that supports our statutory objectives to promote competition, innovation and the interests of service users. As part of this work, we will seek assurances from Pay.UK at specified times about the design, procurement, and implementation of the NPA. We will continue to collaborate closely with the Bank of England, which supervises Bacs and Faster Payments.
We will also monitor Pay.UK’s compliance with SDs 2 and 3, as amended by SDs 2a and 3a.
In parallel to the NPA CIS procurement process, we plan to engage with Pay.UK and bidders to understand how they intend to comply with our regulatory framework and to make our expectations clear. We intend to publish and consult on draft directions implementing our regulatory framework closer to the go-live date for the NPA before giving them to Pay.UK and any relevant CIS provider.
CP21/8 - Lowering risks to delivery of the New Payments Architecture
CP20/2 - Call for input: Competition and Innovation in the UK's New Payments ArchitectureUPDATE: 20/04/2020 We will be closing our Call for input: Competition and Innovation in the UK's New Payments Architecture (CP20/2) on 1 May at 5pm.
PSR's open letter to Pay.UK Limited - May 2019We have published an open letter to Pay.UK Limited.
PSR's open letter to the New Payment System Operator (NPSO)We have published an open letter to the New Payment System Operator (NPSO).
CP21/2: Consultation on delivery and regulation of the New Payments Architecture
Responses to call for input on competition and innovation in the New Payments Architecture
Supporting the successful renewal of the UK’s interbank payment systems
PSR consults on ways to reduce risks to the successful renewal of the UK’s interbank payment systems
PSR PS21/3: New Payments Architecture (NPA) regulatory framework publishedWe have published our regulatory framework for the New Payments Architecture (NPA) central infrastructure services (CIS) following our consultation on the delivery and regulation of th…
PSR RP21/2: Lowering risks to the New Payments Architecture (NPA) delivery – final changes to Specific Directions 2 and 3