Renewal of the high value payments infrastructure - enabling innovation through industry engagement

Described as 'the backbone of every payment in the UK? by Bank of England governor Mark Carney, the Real-Time Gross Settlement (RTGS) is the infrastructure that holds accounts for banks, building societies and other institutions. The balances in these accounts can be used to move money in real time between these account holders. This delivers final and risk-free settlement.

The Bank has initiated a programme to renew the RTGS service to reflect changes in the payments landscape - including technological advances, regulatory demands, and changing user expectations of consumers and businesses. The renewed service is intended to deliver increased infrastructure resilience and access, offer wider interoperability, improved user functionality and strengthened end-to-end risk management. Adopting a measured approach, the change implementation is to be phased over a number of years and is expected to be completed in early 2023, with the legacy infrastructure closed down in 2024. Further details of the Bank's RTGS renewal programme are available here.

Among the enhancements to be delivered are a number of specific initiatives that should be considered in the broader context of European and global developments: interoperability between gross and retail payment schemes (the latter managed by Pay.UK); enhanced data capability; the drive to increase competition; and the move to enable innovation at the heart of the payments network.

Established and new market entrant Payments System Providers (PSPs) should view the renewal programme not just as a requirement to update their process and systems, but as one that offers a unique opportunity for the industry to inform and shape the renewal process and, ultimately, enable innovation in payments. Successful delivery and optimal use of the renewed infrastructure can only be determined with industry engagement in navigating and defining the renewal approach, and by reflecting the increasingly dynamic payments landscape and user requirements.

Some of the themes that would benefit from industry contribution include:

  • Enhanced Functionality: While the messaging used in the renewed RTGS service will abide by the ISO 20022 standard, the Bank is exploring the possibility for creating a message network agnostic service capable of sending and receiving payment messages from multiple sources and interfacing with multiple messaging networks. The new system will also include updated features like automated notifications, increased information exchange capacity and the option to forward schedule movements between accounts in RTGS. The Bank is also considering support of a range of settlement initiation models such as integration with Distributed Ledger Technology and exploring demand for 'synchronisation? functionality - the ability to synchronise cash movements in RTGS with the movement of cash or assets in other systems. Potential use cases include housing transactions, corporate actions and cross-border payments.
  • Data-centricity: As of November 2018, the RTGS service supports the SWIFT GPI (Global Payments Innovation) service, to allow track and trace of payments for CHAPS Direct Participants for domestic and international payments. The development of tools to deliver business intelligence and to enhance monitoring and compliance utility services are also under consideration.
  • Interoperability: The Bank will adopt the ISO 20022 messaging standard enabling interoperability with other systems migrating to this standard, such as SWIFT's international payment network and the domestic UK retail payment schemes operated by Pay.UK. The Bank will introduce new information fields within the ISO 20022 standard, in addition to information currently contained within CHAPS messages, offering the potential for further data driven innovation and value ?added services.  UK Finance has published an accompanying blog on these common industry technical standards and how they are opening up the possibility of new products and services to consumers.
  • Increased competition: The Bank continues to seek ways to increase access to the RTGS service to foster competition and facilitate improved user outcomes. The renewed RTGS service will be built to accommodate a substantial increase in the number of account holders, for example, the process to join RTGS is expected to be simpler, affording the emergence of new market propositions and use cases. A fundamental change has been that, since 2018, non-bank PSPs have been eligible to access RTGS settlement accounts to enable direct participation in payment systems.

UK Finance, in collaboration with the Bank, is facilitating industry engagement on this strategic change programme through member events and communications. The industry has a unique opportunity to inform and shape the design, development and delivery of the RTGS renewal programme, ensuring that it is ?future proofed? and capable of delivering innovation in the payments landscape for years to come.

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