Innovative overlay services

Built around the concept of an instant credit transfer, the NPA reduces risk by using prefunded settlement capability. The end goal is to have NPA sitting alongside the Bank of England’s new real-time gross settlement (RTGS) solution using similar message formats. This will allow routing between them based on value and availability.

While not providing overlay services, the intention is to provide a payments environment that encourages competition and innovation for overlay and business services that require a fund movement element. Such competitive overlay services include file services. These allow corporations to continue to use files to initiate payments and consumer-mandated payments that use Request to Pay to replicate the UK’s direct debit scheme.

While these services can be provided today, the NPA will support an extensive payment message based on ISO 20022. This will enable a better data flow along the commerce journey, improving efficiency and reducing exceptions.

Replacing aging infrastructure and standardising Messaging

The first phase will be the replacement of the Faster Payments infrastructure, now 17 years old, which uses the ISO 8583 cards messaging format – a small message format, and structure.  The NPA will replace this with instant Single Credit Transfers, utilising the ISO 20022 data model that is information rich.

After that, it is envisioned that transactions using the current Bacs scheme will be transitioned across to the NPA. This means using commercial overlay services to provide the current user experience and the NPA to handle the exchange and settlement of funding instructions. How and when the transition from Bacs direct debit to the new service will take place has yet to be determined. However, with a desire from the CMA and the competitive FinTech market, solutions are already in flight to offer a range of innovative alternatives.

Too little, too late?

Delays and reduction in scope has led to innovation happening outside of the project and consequently further reduction in scope.  However, we believe that this has been to the benefit of NPA. Rather than maintaining the status quo, NPA has the potential now to be a lightweight, simple payment scheme that should enable commercial provision of innovative services. 

Get ready for NPA

With the NPA build scheduled for a late 2022 start, there is an expectation that existing Faster Payments Scheme participant banks will be ready to start testing in March 2023. This will enable direct participation by all financial institutions. Although the NPA will continue to support the existing Faster Payments timeline, current indirect agency banks will be expected to become direct participants, operating in a sub-five-second, near real time, 24/7 environment.  

All financial institutions that have banking services in the United Kingdom will need to understand the impact of NPA for their customers and themselves, and need to be ready to deal with new, innovative competition.