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What Is the New Payments Architecture?

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Last editedJan 20222 min read

The new payments architecture (NPA) is the UK’s new industry program of organising payments between banks - known as interbank payments. The payment system architecture within the UK has to serve diverse needs, across both businesses and consumers. Whether you’re transferring money to a friend, or paying employee salaries, you expect these payments to run fast and smoothly. The core principle of the new payments architecture is to streamline interbank payments into a single settlement system, as opposed to the numerous systems currently in place. The NPA programme will create a new clearing and settlement infrastructure based on ISO22002, making it the biggest shift in payment processing since 1960.

Why does the UK need a new payment gateway architecture?

The current payment gateway architecture is complex. BACS, Faster Payments and Cheque and Credit are the main facilitators of interbank payments, however, they all operate with a different set of rules as they are processed using separate infrastructures. This has resulted in a system which lacks flexibility. As well as the need to simplify this complex infrastructure, there are several other reasons why the UK needs new payment gateway architecture:

  • New regulations are coming into place

  • New entries and competition

  • New anti-money laundering requirements

  • New technology

  • Ever increasing digitisation, and a huge switch from cash to card over the pandemic

  • The roll-out of real time payment systems around the world

Therefore, there has never been such a need for a trusted system to make it easier for banks to comply with all of these new requirements.

What are the aims of the new payment system architecture?

The NPA will modernise UK bank payments, creating a more secure way to pay and be paid. The new payment system architecture promises to introduce radical features, like the end of BACS 3-day cycle which is no longer feasible when organisations have become accustomed to real-time settlement. Direct Debits will continue to be widely used, but the way they are processed will be easier, faster and more secure. The main aims of the NPA are to:

  • Improve flexibility and security

  • Boost innovation and competition

  • Ensure ongoing stability and resilience

  • Keep up with new customer habits

  • Ensure resilience and stability

  • Benefit businesses and customers who use payment services

Who is behind the new online payment architecture?

The new online payment architecture is driven by the payment system regulator (PSR) and is the brainchild of the Payments Strategy Forum (PSF). Pay.uk is in charge of implementing the changes, but various other institutions are involved, including service users and payment providers.

What are the next steps for NPA and mobile payment architecture?

Since its inception in 2015, the implementation of the new online payment architecture has been delayed. This is partly due to COVID-19, but also due to the complexity of migrating existing systems. There is currently no supplier in place for the proposed online and mobile payment architecture infrastructure, as this search was paused in June 2021. The first phase of a five-stage procurement process for the NPA CIS was completed in March 2019. There is still some way to go, and the PSR is weighing up the best approach. So, as it stands, although work is in progress, the new payments architecture is still a conceptual model.

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