CP24/13 - Consultation on amending Specific Direction 3

We are consulting on proposed changes to Specific Direction 3 (SD3), which sets the legal requirements for Pay.UK in procuring upgraded infrastructure for payments currently made over Faster Payments (FPS).

What does this document contain?

Due to changed circumstances surrounding the NPA programme, Pay.UK is no longer able to meet the deadline in our Specific Direction 3 (SD3) that it must migrate all Faster Payments transactions to competitively procured infrastructure by 1 July 2026. Those changed circumstances will likely result in the current FPS central infrastructure remaining operational for significantly longer than previously expected.

The PSR is therefore proposing changes to Specific Direction 3 to reflect the changed circumstances. In doing so we have had in mind the importance of the continued operation and resilience of Faster Payments, the appropriate regulatory oversight, and progress towards our intended outcomes for infrastructure. These are: 

• better access 
• greater innovation 
• increased adaptability 
• reduced financial crime 
• improved competition, including alternatives to cards such as account-to-account retail payments.

Why are we publishing this document?

We are consulting on making changes to Specific Direction 3. These proposals include: 

• Removing the current SD3 deadline: The PSR recognises that Pay.UK cannot meet the current legal requirements under SD3 because of changed circumstances. The PSR proposes removing this migration deadline and replacing it with an ability for the PSR to set a new deadline. Any new deadline will not be before 1 July 2036. 
• Strengthening oversight: The PSR proposes a ‘non-objection’ point before Pay.UK agrees to any new, or extended, contract for infrastructure services. This is a specific measure to ensure Pay.UK meets the PSR’s desired outcomes for any infrastructure upgrades. More broadly, the PSR will ensure that setting an appropriate level of oversight of Pay.UK is a priority as it works with the Bank through the reviews set out in the Vision.
• Enhancing its Regulatory Framework: The PSR plans to update its 2021 Regulatory Framework to address risks to competition and innovation. The PSR intends to publish a more detailed timetable for its consultation on the updated Regulatory Framework along with its decision on SD3.

Who should read this document?

This document is relevant to the payments industry and Pay.UK in its role as the operator of FPS.

What happens next? 

The PSR is seeking views on this approach until 5pm on 21 January 2025. After carefully considering feedback, the PSR plans to give its decision on SD3 in Spring 2025.  

You can email your comments to PSRNPA@psr.org.uk or write to us at: 

PSR NPA project team 
Payment Systems Regulator 
12 Endeavour Square 
London 
E20 1JN