New Payments Architecture & ISO 20022: Everything You Need to Know

The UK’s Faster Payments system has been effectively enabling instant money transfers between participating banks since 2008. However, despite the prominent role this scheme has played throughout the years, it is gradually becoming outdated and requires an upgrade to keep up with the rapidly evolving payments landscape.

Due to this, the UK's government has announced plans to improve its instant payment infrastructure by incorporating a modern ISO 20022-compliant architecture. This move is aimed at making payments faster, simpler, and more secure for businesses and consumers across the country. Learn more about this initiative below!

New Payments Architecture - How Is It Different?

One of the main distinctive components of the payment system modernization initiative is the adoption of a globally recognized standard for electronic financial messaging, ISO 20022.

This integration is in stark contrast to the ISO 8583 cards messaging format and BACS (Bankers Automated Clearing Services) payment processing system which are currently used by Faster Payments and are lacking flexibility, scalability, and interoperability required to future-proof the UK’s instant payments framework.

The decision to make the NPA ISO 20022-compliant is predicted to yield a multitude of benefits for the country’s payment ecosystem - read on for all the details!

Key Benefits Associated with NPA’s Integration in the UK

Even though the NPA’s exact launch date is still not confirmed, industry experts already forecast it to be a game-changer for the future of real-time payments in the UK. Here are some of the major benefits the new ISO 20022-compliant architecture is expected to offer:

• Increased efficiency. The NPA is expected to significantly reduce the time and resources required to conduct payments.
• Interoperability. The novel system will promote interoperability between all the parties involved in the initiative, making it easier for consumers and businesses to access a wide range of payment options.
• Improved competition. The upgraded system aims at creating a level playing field for payment service providers, fostering healthy competition across the industry.
• Advanced security. The New Payments Architecture will incorporate state-of-the-art security features to protect consumers and their personal and financial information from fraud.
• Enhanced innovation. By adopting a modern, ISO 20022-compliant architecture, the UK payment system will facilitate the development of innovative financial products and services.
• Lasting stability and resilience. The NPA program is designed to ensure that payment transactions can continue to be processed even in the event of technical issues or other disruptions.

As you can see, there are plenty of potential benefits of the NPA. But when can we expect this system to go live?

NPA’s Current Development Stage & Preliminary Timeline

The preliminary launch of the ISO 20022-compliant NPA is set for mid-2024. However, the delivery of such a large-scale real-time payments infrastructure requires a lot of planning and coordination, which means that the timeline may shift if unexpected challenges are encountered.

What’s more, it’s critical to note that some authoritative sources claim that it is unrealistic for the NPA to be fully functional by 2025 and suggest an allegedly more reasonable deadline, the 2030s.

According to Pay UK, its key focus is to create a set of rules that is easy to navigate and use. The company also intends to design it as a lightweight document, preventing it from being as content-heavy as the current Faster Payment System rulebook.

How Should FIs Respond to NPA’s Introduction?

The New Payments Architecture is a major step forward in the evolution of the UK’s payment ecosystem. Financial institutions should prepare for its introduction in advance by assessing their existing payment systems and services as well as ensuring compliance with ISO 20022, which is a crucial aspect of the payment modernization agenda.

FIs should also stay informed about developments in the industry and keep up with new customer habits and preferences while focusing on long-term efficiency and resilience. By taking these proactive steps, FIs can be well-positioned to take advantage of the opportunities presented by the NPA and provide improved and more innovative payment services to their customers.