Things are changing fast in the UK payments space. With a major overhaul of both technology and its administration underway, what does this mean for banks and end-users both in the UK and further afield?
UK payments infrastructure is in a time of great change – presenting an opportunity for those banks that are at the forefront of these changes to enable a wider choice of payment options to consumer customers while offering a wider range of solutions to support increased efficiencies for corporates.
Since the 2015 introduction of the new payments regulator – the Payment Systems Regulator (PSR) – we have seen the appointment of the Payment Strategy Forum (PSF) charged with re-viewing and identifying solutions to bring yet more innovation, competition and benefits to end users in the UKpayments space.
In July 2017, PSF delivered its blueprint, implementing two major changes. The UK’s three payment schemes – BACS, Faster Payments Scheme (FPS) and Cheque and Credit Clearing (C&CC) – and the national administration body would amalgamate into the single New Payment Systems Operator (NPSO). NPSO will now oversee delivery of the New Payments Architecture (NPA), combining the separate schemes into a single ISO20022-based platform.
“The PSR has reviewed the complexity of running the three independent schemes and the impact of this on competition,” says James McMorrow, Head of Payments Strategy, Global Transaction Banking, Lloyds Bank. “Now, with one central team, a single strategy and alignment of purpose, it is expected to increase access and improve the user experience for all.”
With the payments space, under PSD2, opening up, and the drive for innovation seeing a ow of ntechs partnering with the major banks, the industry is ready to deliver that enhanced experience.
Link this to consumer behavioural changes – driven largely by the rise of e-commerce and mobile and the ascent of “data” to the top of the agenda for banks and corporates – and the creation of a framework capable of delivering standardisation, deeper analytics and improved security now seems essential.
Adding value for clients
“Standardisation of data sets will help improve reconciliation and bring opportunities for solutions such as machine learning to automate tasks,” says McMorrow. This will enable client teams to focus on adding value and banks to offer clients deeper analytics, or data streams, for their own use.
In practice, where data message fields have been restrictive, proposed additional elds could enable end-users to provide information such as purpose of payment, Legal Entity Identi er (LEI), additional agent fields and more detail around originator and ultimate beneficiary.
As part of the current NPA consultation, a further proposal could offer enhanced data and overlay services, supporting client operations. Confirmation of payee tools, for example, would add validation and an additional layer of payment security for payers, and request-to-pay would give consumers more payment exibility – while also giving corporates greater control over reference information and con rmation of the payment.
Offering such services, notes McMorrow, will improve client reconciliations, driving new working capital, and operational effciencies. In addition, as banks gain an end-to-end view of their clients’ supply chains, it could create opportunities to enhance their relationship through value-added services such as supply-chain finance.
The UK’s consolidation of payment mechanisms into a single architecture is unique. McMorrow believes there is now an opportunity for other payments jurisdictions to explore the benefits of consolidation and “enhanced harmonisation.” Indeed, he suggests convergence of schemes towards a true global payments framework might just be possible.
All stakeholders need to be thinking about how these changes can be made central to their business, notes McMorrow. Investment cycles will play a key part in that decision, but the benefits of these new technologies and the enhanced data that this architecture can bring – should also be firmly on the agenda, he says.
Banks that have invested heavily in their platforms and the concept of payments standardisation now have an opportunity to partner with clients, helping them through the migration and driven by the notion that no one should be left behind.