PSR PS21/3: New Payments Architecture (NPA) regulatory framework published

• NPA framework sets out requirements on both Pay.UK and a central infrastructure services (CIS) provider that will address risks to competition and innovation in the NPA ecosystem
• Illustrative directions published to show how framework could be implemented

We have published our regulatory framework for the New Payments Architecture (NPA) central infrastructure services (CIS) following our consultation on the delivery and regulation of the NPA. The NPA framework has been developed taking account of responses to that consultation and aims to address risks to competition and innovation in the NPA ecosystem arising from the behaviour of a provider appointed to deliver the NPA CIS.

What is the NPA and why is it important?

The NPA is one of the biggest changes happening in UK payments.  It is the payment industry’s proposed way of organising the clearing and settlement of most UK interbank payments in the future. 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.

Delivered well, the NPA can help realise the outcomes we want to bring about in payments and facilitate our proposed long-term strategy. By strengthening competition and innovation in payment services and between payment systems, the NPA can help provide better value and effective choice of payment options for people and businesses. The NPA can also improve the resilience of payments and, by enabling more data to be included in payment messages, help reduce fraud. 

Pay.UK, the operator of Bacs and Faster Payments, is responsible for delivery of the NPA. 

Our role is to monitor Pay.UK’s work to deliver the NPA and, where appropriate, use our powers to assure an outcome that supports our statutory objectives to promote competition, innovation and the interest of service users. 

What the framework addresses

Earlier this year, we consulted on reducing risks to competition and innovation relating to when the NPA is operational. If these risks materialise, competition in payments services or between payment systems could be distorted or dampened, leading to higher prices, lower quality of service and less innovation.  

Having considered the responses, our framework aims to address these risks by requiring that Pay.UK must:

• be the primary interface and decision-maker for CIS provision
• set CIS user prices and do so using a methodology that adheres to certain pricing principles and is subject to our non-objection
• set the rules and standards for the NPA CIS and ensure that these facilitate competition and innovation
• ensure that the CIS facilitates innovation and competition
• ensure that a CIS provider does not use, or disclose to any other party including its affiliates, information and data for anything other than CIS provision
• in a timely manner, make available to the market, information and data concerning the provision of CIS that would help facilitate competition and innovation

The framework also requires that:

• If a CIS provider or an affiliate participates in a payment system that competes, or can be expected to compete, with the NPA payment system or is active in NPA overlay services, the CIS provider functions must be operationally separate from other parts of its (or an affiliate’s) business.
• If a CIS provider has no such interests, it must notify us if this might change due to any proposed action or change in circumstances and in any event report annually on its position.

Alongside the regulatory framework, we have also published illustrative directions to illustrate to stakeholders – particularly Pay.UK and bidders participating in any CIS procurement –how the directions we plan to give to implement our regulatory framework could look.

Next steps

We are not seeking comments on the illustrative directions.  We plan to publish and consult on draft directions closer to the go-live date for the NPA before giving them to Pay.UK and any relevant CIS provider.

In parallel to the NPA CIS procurement process, we also plan to engage with Pay.UK and bidders to understand how they intend to comply with our regulatory framework and to make our expectations clear.