Overview of New

Payments Architecture (NPA)

Introduction
• The current payments architecture in the UK centres mainly on Bacs, Faster Payments and Cheque and
Credit to facilitate interbank payments, however these all operate on different sets of rules and standards.
• As a result, the current interbank clearing and settlement system is complex, lacks flexibility, and risks
stifling innovation and competition.
• The objective of the NPA (New Payments Architecture) is to process interbank payments via a single clearing
and settlement system (as opposed to the various systems currently in place), simplifying the structure and
ensuring interoperability, which should in turn foster innovation.

Scope & Objectives of NPA

• The original ambition and scope for NPA was the consolidation of all current payment types, including
Faster Payments, Banker’s Automated Clearing Systems (BACS) and Clearing House Automated Payments
System (CHAPS), and Cheque and Credit Clearing (C&CCC) into a single, central, modern ISO 20022-
compliant architecture.
• However, following regulatory review, the scope of NPA has been narrowed back to focus on replacement
of Faster Payments, with the option (subject to regulatory agreement) to also include BACS at a later stage.
• Clearing and settlement of payments will take place over a single purpose-built central infrastructure rather
than the separate infrastructure that is currently used with one set of rules, standards, and processes.
• This will help make the UK’s retail interbank payments ready for the future as payments technology and
people’s habits continue to evolve.
• In particular, PSPs will be able to develop “overlay services” that can be bolted onto the single core layer.
• The main drivers and catalysts for this modernization include simplification and making access to the
scheme for new participants (challenger banks, fintechs and regtechs) easier, accelerated innovation,
increased competition, and delivering new payment services at lower costs.

Who is behind the NPA?

• The NPA is the brainchild of the Payments Strategy Forum (PSF), a steering committee comprising of service
users and payment services providers set up in 2015 to recommend changes to the UK’s payment
architecture.
• Pay.UK, the operator of Faster Payments and BACS, has been tasked by the PSR to secure the CIS contract
for NPA implementation by procuring through a competitive tender.
• The CIS provider will be responsible for the design and build of the NPA system which includes a structure of
hardware, software and accompanying security standards and operational functions.
• Various other participants from across the sector are also involved, from the Payment Systems Regulator
(who monitors Pay.UK’s work on the NPA) to service users and payments providers, who regularly
participate in consultations aimed at promoting the efficient delivery of the NPA.

Consolidated and Published by Pradyumna Acharya B. Follow on LinkedIn by clicking Here for more such articles. 1
6 Payment Types included in the NPA

• The NPA has defined a set of products that will be made available for the participants, who will select which
ones to implement depending on their individual business needs.
• These payment types have similar attributes to FPS and BACS payments today but will be built on a richer
ISO 20022 format, replacing the legacy FPS ISO 8583 and proprietary BACS Standard 18 formats.
• All payment types are aligned with Pay.UK strategy of unlocking account-to-account payments, owned by
Pay.UK and include all real-time transactions between consumers and/or businesses, as shown below.

Payment Type Description

The standard payment product for Payment Service Provider (PSP) to PSP customer
Priority Payment payments, replaces the SIP and will probably replace the majority of Standing Order
Payments (SOP) and Future Dated Payments (FDP).

A new product which the NPA will make available for Retail/eCommerce payments. The
Instant Payment
instant payment requires a definite response from recipients in ‘near real time’

Same-Day A new payment type which will be processed when NPA has available capacity and reduces
Payment cost. May replace some SOPs/FDPs.

Single payment message with multiple individual credits, one debit, may improve processing
Multi-Payment
efficiency (Participants and NPA) may enable early BACS Credit migration

A file based service which allows Participants to efficiently submit large payment files to the
Bulk Payment
NPA in batch. Bulk files may include Priority or Same Day payments.

Allows Corporates and PSPs to submit payments to the NPA for bulk processing with
Multi-Day Bulk
improved efficiency, improved liquidity management, pre-notification of settlement and
Payment
other functional benefits to Corporate and Government users

Expected benefits of NPA modernization

• Opportunities for users and businesses to choose their payments journey depending on their preferences
and needs and always in a safe and secure environment.
• Development of new digital overlay services (also known as value-added services) connected to a single
payments infrastructure, instead of having multiple connectors and different integrations. Some examples
include Request to Pay, Confirmation of Payee and QR code payments.
• Pay.UK has already developed two of those services: Confirmation of Payee and Request to Pay (destined
to replace direct debits) and other such additional services will be developed soon.
• The new infrastructure is designed to allow fintech and regtech suppliers to add new services.
• Enablement of new revenue streams. With this consolidation, financial institutions have better tools to track
and obtain information from consumer payments.
• Agility from new technology. The NPA brings new technology that is no longer limiting innovation, is more
scalable and flexible, and improves go to market.
• Migrating to one interbank payment system results in better payment tracking and the ability to send more
information to support and enrich downstream payment processes, such as reconciliations.

Consolidated and Published by Pradyumna Acharya B. Follow on LinkedIn by clicking Here for more such articles. 2
The NPA Journey so far

The NPA Journey ahead

February 2022: U.K. Faster Payments participants need to submit documentation to Pay.UK to demonstrate their
level of preparedness for NPA, including:

• How they will comply with NPA (Design Document – attestation)

• Milestone plan
• Impact assessment including the systems’ changes needed

April 2023: NPA certification testing window opens for all interested financial institutions

Mid-2024: NPA scheme go-live

End 2025: Migration from U.K. Faster Payments to NPA complete following 18 months of co-existence

Consolidated and Published by Pradyumna Acharya B. Follow on LinkedIn by clicking Here for more such articles. 3