New Payments Architecture (NPA)

The UK payments industry’s proposed new way of organising interbank payments. 

We want the UK’s payment systems to serve the diverse needs of businesses and consumers for many years to come. 

That’s why we are closely monitoring the development and delivery of the New Payments Architecture (NPA) - the UK payments industry’s proposed new way of organising the clearing and settlement of payments between banks, known as interbank payments.  

Whether paying employee wages, or transferring money to a friend using internet banking, interbank payments are a key part of everyday life for businesses and consumers alike. It’s vitally important that they run smoothly and rise to the challenges of the future.

Done well, the NPA has the potential to future-proof payment services in the UK by providing a robust and sustainable infrastructure where innovation and competition can thrive. 

Who is responsible for delivering the NPA? 

In 2015, we set up the cross-industry Payments Strategy Forum to identify, prioritise and help to deliver initiatives where it is necessary for the payments industry to work together to promote collaborative innovation.

The Forum published recommendations which included consolidating the operators of Bacs, Cheque and Credit (C&C), and Faster Payments (FPS). In addition, the strategy proposed the creation of a New Payments Architecture (NPA). 

We then set up the Payment System Operator Delivery Group (PSODG) with the Bank of England in October 2016 to consider key issues relating to the potential consolidation.

The PSODG published a report in May 2017 setting out its recommendations on the key characteristics of a proposed New Payment System Operator (NPSO), with the NPA as one of its core deliverables.

The NPSO became Pay.UK in October 2018 and operates as a not-for-profit company limited by guarantee. It is responsible for delivering the NPA

What is our role? 

The NPA is one of the biggest changes happening in UK payments and the role of the PSR is vital in making sure this change works well for people and businesses.  

Alongside the Bank of England, we are monitoring Pay.UK’s work throughout the development of the NPA. Together we’re working to ensure that the NPA is resilient and takes account of and promotes good outcomes for all users. We will also continue to consider whether we need to use our powers, both in the short and long term, to ensure it delivers the intended long-term benefits. 

In January 2020 we issued a call for input, asking for stakeholders’ views on issues that could affect competition and innovation in the NPA. This followed our work setting out our expectations and thinking about the development of the NPA, which we summarised in open letters to Pay.UK in 2018 and 2019. These covered risk, competition, innovation, rules and standards, governance and decision-making, and stakeholder engagement.

In February 2021, we published non-confidential responses to our call for input. We have also published a consultation setting out ways to reduce risks to the successful renewal of the UK’s interbank payment systems and proposals to mitigate risks to competition and innovation. Reponses will help inform our next steps, later in the year.

In July 2021, we published a paper setting out our decisions for reducing risks to the renewal of the UK’s interbank payment systems. 

We decided that Pay.UK should phase the development of the NPA by narrowing the scope of the NPA central infrastructure services contract. Pay.UK must secure this contract through a competitive tender.

We are also consulting until 10 September 2021 on the draft legal instruments we plan to give to implement our decisions.

What will the NPA look like? 

The Forum proposed creating a new payments architecture – the NPA – to replace the architecture used for today’s UK retail interbank payment systems (Bacs and Faster Payments). 

It is envisaged that clearing and settlement of payments will take place over a single purpose-built central infrastructure rather than the separate infrastructure that is currently used. 

This platform will be designed in a way that allows new and existing payment service companies to develop services that benefit consumers and businesses using the system. This will help make the UK’s retail interbank payments ready for the future as payments technology and people’s habits continue to evolve.

We want to see the NPA delivered in a way that drives innovation and competition in payment systems and benefits everyone - from big banks and retailers to local merchants and high-street shoppers. This can be done by boosting competition between existing and new payments services as well as enhancing resilience and security in payments.

What are we doing now?

We are monitoring Pay.UK’s work closely and take active measures, including our latest consultation, to ensure good outcomes for everyone.

We have outlined four targets which we think need to be met for the NPA to be considered successful: 

  • Increased innovation in the payments industry; 
  • Effective competition across all layers of the NPA, with low entry barriers for Payment Service Providers (PSPs) and other service providers; 
  • The timely delivery of the NPA, with support and engagement from all stakeholders; 
  • The technical robustness and resilience of the NPA.

What’s next?

We will continue our assurance work on the NPA programme to ensure it meets the expectations we’ve set out, supporting competition and innovation in the interests of all users. Throughout we will work closely with the Bank of England to make sure our respective approaches and desired outcomes for the NPA programme are aligned and achievable.