After endless rounds of aborted procurement and incoherent planning the UK’s grand “New Payments Architecture” finally looks dead as a doornail.
And the failure-to-deliver it vehicle, industry group Pay.UK, looks set for "reform" too, if not outright abolition; as the government today laid out a bold plan to take strategic control of and streamline payments regulation.
On the agenda: Support for "account-to-account" payments innovation; more Open Banking (with streamlined regulation); and a new "Payments Vision Delivery Committee" (PVDC) chaired by HM Treasury.
The National Payments Vision
Ministers laid out the UK’s new “National Payments Vision” (pdf) today in response to the independent 2023 Future of Payments "Garner Review".
They admitted that “upgrading the UK’s retail payments infrastructure has been slow and challenging” and this week promised a new approach.
Notably, that new vision says:
The government has considered carefully the role of the New Payments Architecture programme and concluded that a more agile and flexible approach to delivering the UK’s infrastructure needs is required to ensure the UK is primed to seize the opportunities of next generation technologies.
Good riddance then to the “NPA” and hello to the “NPV”?
What is/was the New Payments Architecture?
Slow reform of UK payments infrastructure has arguably been partly due to bottlenecks at the Bank of England, which is inching closer to migrating to a new technology engine powering its Real Time Gross Settlements (“RTGS”) infrastructure, which underpins settlement of sterling payments.
Without the BOE’s large and dusty RTGS back-end being modernised not a great deal can happen, easily, in UK payments, critics say.
That hasn’t stopped Grand Plans for Big Bang payments reform over the years. Central to this was plans for a “New Payments Architecture” that would bundle a trio of payments systems (Faster Payments, BACS and Cheque&Credit) into a single new architecture with a standardised ISO20022 XML payment data format approach and the NPA settling all of these payments, rather than that crusty old RTGS system at the BOE.
Seven years pass...
This started in 2017 with a procurement process led by what was then organisationally called “Faster Payments.” Faster Payments was then rolled into something called the NPSO which in turn then became industry body Pay.UK; the “operator and standards body for the UK’s interbank retail payment systems” – which is, rather mystifyingly, led David Pitt, the former COO of the UK’s botched Covid “Track and Trace” programme.
As today's report points out, Pay.uk's design and current governance model have "in practice made it very difficult to progress a strategic agenda as originally envisaged... it is able to progress activities such as funding new infrastructure or enhancement projects only with the consent of its members or through the imposition of regulatory obligations."
A 2023 review of NPA progress meanwhile described the views of industry interviewees as “forthright” and “emotive”, concluding “that confidence in a timely and successful delivery of NPA appears variable at best”.
Procurement appears from where we sit to have waxed and waned over the years without a great deal to show for it, beyond, perhaps, 2019’s “Image Clearing System.” As recently as in its 2023 annual report, published in June of this year, Pay.UK was "clarifying" to the world that it had:
Concluded our robust regulatory, business development, and vendor procurement processes early in the year and subsequently secured approval from our Board to submit the Vendor Contract Non-Objection (VCNO) to our regulators in April 2023. [But] this procurement process was paused, following the Government’s decision to consider it as part of the... NPV.”
(This is probably Greek to most of our readers; we suspect a translation is "much sound and fury, signifying nothing; much money spent; many frustrated partners; oh, here come new ministers with a box of matches.")
The writing may have been on the wall when earlier this year the Payment Systems Regulator (PSR) wrote to Pay.uk, saying it should start conversations with payment rails operator Vocalink around standalone investment to improve its infrastructure, outside any grand NPA plan.
(Any potential conflict of interest around Pay.uk's CFO being Vocalink's former long-standing CFO has no-doubt been robustly mitigated.)
So, an "NPV"? What happens now?
Tulip Siddiq MP, Economic Secretary to the Treasury, described the government in the New Payments Vision paper today as backing:
“A package of actions to cut through the current regulatory congestion facing the sector, and steering the approach to vital upgrades that are needed to the UK’s underlying payments infrastructure.”
It sounds like Pay.uk may be in for the chop too.
A newly established "Payments Vision Delivery Committee" will, through work led by the Bank of England and the Payment Systems Regulator PSR:
“Clarify the upgrades required to the existing Faster Payments System, assess longer-term requirements and the appropriate funding and governance arrangements needed to deliver this – including proposals to reform Pay.UK”
(Last year's "Garner Review" had pointed to an "absence of clear and coordinated leadership, creating a congested landscape as industry and regulators seek to keep pace with the evolving technological environment through well-intentioned, but sometimes isolated and conflicting initiatives.")
The NPV looks like a bid to put the government much more directly in charge of strategic direction. It also "sets out the government’s commitment to explore a potential retail Central Bank Digital Currency, the digital pound" without committing it to doing so; points to the importance of Open Banking and declares plans to streamline regulation.
It is, suggested one observer and industry veteran, Bob Lyddon, last year's "Garner Review" (the Future of Payments Review 2023) essentially "re-issued and endorsed, with a lot of enthusiastic and Action Man type words.
"Open Banking is to be the main channel for action, and we have digital ID in the mix. But we do not have any detail on moving the dial on payment fraud by altering the messaging and process/control in the Faster Payments system. Instead we have the opposite: driving ahead with account-to-account payments (i.e. switching card payments to Faster Payments) without any extra fraud protection measures within the core process. That will be great for fraudsters" he told The Stack.
Lyddon added tartly: "They seem to have abandoned NPA because they want an even-more-up-to-date infrastructure whilst still holding to the delusion that ISO20022 XML is up-to-date. Its first deployment was in 2008 for SEPA and it has never willing been adopted anywhere by end-users: it has been adopted because the alternatives have been sun-setted by financial regulators and/or governments and/or by operators like SWIFT under pressure from regulators/governments..."
Tom Burton, policy director at GoCardless, added in an emailed comment: "Setting a clear ambition for seamless account-to-account payments to be developed as a ubiquitous payment method is the right way forward. We welcome the support for upgrading the underlying payments infrastructure and developing a commercial model for open banking.”
Have views on all of this? Share away, in confidence or for print: just say.
