Future regulatory framework set for New Payments Architecture

The Payment Systems Regulator describes it as “one of the biggest changes happening in UK payments”. The project for a New Payments Architecture plans to reorganise how retail interbank payments are cleared and settled. The PSR has now laid out the regulatory framework within which the NPA will be delivered.

The NPA would replace Bacs and Faster Payments – systems which process millions of payments every day. Pay.UK, as operator of these payment systems, is responsible for the design and delivery of the NPA. It is also responsible for procuring a central infrastructure services (CIS) provider, something which has not so far proved straightforward (see our February 2021 blogpost: UK regulator seeks to get retail payments infrastructure upgrade back on track).

In PS21/3 the PSR confirms the requirements that it will impose on Pay.UK and its NPA CIS provider. The NPA is not expected to be launched until mid-2024 but the PSR is setting out its rule framework now to provide clarity to the relevant stakeholders.

The PSR is worried about the competition and monopoly risks arising from the provision of the NPA’s central infrastructure and so its rules include requiring Pay.UK to ensure that the CIS facilitates both innovation and competition. For example, CIS user prices would be set using a methodology which is subject to non-objection by the PSR. The CIS provider would be told to operationally separate its CIS functions from any other parts of its business where it has a significant interest in another payment system or overlay services. Various reporting requirements will also apply to both Pay.UK and the CIS provider so that the PSR can monitor compliance.