On 15 February, techUK was delighted to welcome the CEO of Pay.UK, Paul Horlock, who explained the progress of Pay.UK so far, set out the timeline of future deliverables and led a wide-ranging discussion with techUK members on the future of payments both within the UK and internationally.
Paul began by running through his slides – see pdf at foot of this article.
The objectives of Pay.UK
Paul explained that Pay.UK sees itself as the guardian of a new and wider payments ecosystem which is there for the benefit of consumers, not banks. It aims to be open, inclusive and as consultative as possible.
Pay.UK has already brought three schemes, Faster Payments, BACS and cheques, into one single scheme. It is now working to construct the New Payments Architecture (NPA) which will be simpler and more efficient than the old system.
They have three key objectives: guardianship, services and innovation and the system as a whole will be designed to reduce ecosystem risks, avoid operational disruptions, plan for recovery and scale effectively – all with data integrity at its heart.
New Payments Architecture (NPA)
The NPA, Paul explained, is like a funnel with a core clearing and settlement layer at the bottom, which will allow real-time push-payments. A tendering process is underway for this core layer, which must be able to cope with changes in payment habits in the future.
Work will start from the centre and gradually be opened up for companies to build their own services and plug-ins. The aim is to enable overlay service propositions, but the interconnections will be complex as, in some instances, overlays will need to connect very tightly with the core, while others will be more competitive and driven by the market.
Work on some new services is already underway – e.g. request to pay. This service can be underpinned with standards, but it should be the market which finds and delivers the competitive opportunities.
Also, the use of ISO 20022 means that everyone will use the same language, thus cutting costs and freeing up funds for improving the system as a whole, thus creating more opportunities for innovation from the market. Smaller institutions, like building societies will also benefit as they will be able to connect directly with the NPA rather than going through agency banks.
Structure of Pay.UK
Pay.UK is a company limited by guarantee – so it has guarantors (rather than shareholders) who sit on AGMs and ensure it fulfils its purpose and strategic directive. There are currently 36 guarantors made up of fintechs, trade associations, vendors, charities – the aim is to be as representative as possible. It also aims to be consultative – through the Participants Advisory Council and the End-User Council. techUK has member representatives on both these Councils.
In the past, banks have funded the payments system and the schemes would just request funds as and when they were required. But Pay.UK wants to establish ‘more inclusive’ funding model, using charging per click tariffs.
As to the OBIE, there is a desire from some that it should that it move into Pay.UK and this is being considered. Clearly, some functions of open banking, such as the running of the directory and the API standards, fit within Pay.UK’s remit, but others do not.
The Pay.UK sandbox has been live for 6 months and has 100 people in it. Pay.UK wishes to be a catalyst for new services but would not be the originator or owner. In the future, it might consider introducing a Trustmark.
Pay.UK is also working very closely with the regulators. It is regulated by both the Bank of England and the Payment systems Regulator and, since Open Banking must fit closely with the payments system, they also liaise closely with the Competition and Markets Authority. The regulatory field is complex – it is vital that there is clarity as to how the different areas knit together. In addition, each regulator has somewhat different objectives, which must be balanced. Although there can be tension between resilience and the creation of more competition, Pay.UK believes more competition will secure resilience by reducing risk. They are also working closely with other countries and international organisations, meeting regularly to discuss progress.