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The New Payments Architecture (NPA) will spur innovation in the UK, agreed panellists at a recent webinar, although acknowledged that other modernisation initiatives and a lack of incentives are working against its implementation.
The NPA first came to fruition in 2017, established via the Payment System Regulator’s Payments Strategy Forum.
Its objectives include being able to handle rising payments volumes, developing a real-time payment capability (although the UK already has real-time capabilities in the shape of Faster Payments), and adoption of the ISO 20022 messaging standard.
Yet, since the concept came about, the UK has had to contend with Brexit, a pandemic, three prime ministers and counting, and a cost of living crisis, alongside other payments modernisation efforts and the launch of open banking.
The UK is going through an unprecedented change with its payments systems, suggested Kevin Brown, a non-executive advisor to the Bank of England and the Financial Conduct Authority, listing the regeneration of RTGS and CHAPS alongside the NPA.
“At the end of the journey, we’re going to have a fantastic payments system across high value and retail payments,” he said, speaking at the "NPA: The new payments architecture that is here to stay" webinar.
However, Brown acknowledged that the journey will not be easy, admitting that it will also be a costly one.
“The important thing to bear in mind is that these things don’t happen overnight. They are critical infrastructures, which require high levels of resilience.
“Therefore, the planning and implementation of changes is absolutely critical.”
It is far-reaching, from end-to-end of the transaction, he continued.
Despite the flack that the NPA has gotten since its inception from various critics in the payments space, Brown said that the industry “has not sat on its hands” when it comes to innovation and has achieved many things alongside preparing for the implementation of the NPA.
“It is a hotbed of change,” he commented.
It is changes that are happening such as the ISO 20022 that impact on the timeline for the NPA and how to do it properly, said Lewis Glaze-Adams, a payments product manager at Barclays.
Customers' experiences of payments in the UK could be improved by leveraging the NPA, he continued, especially when it is combined with other changes.
The NPA is an initiative that has the potential to bring the UK to the forefront of payments modernisation.
“We all know that payments modernisation efforts are long due and the next few years are going to be critical to inch towards that modernisation.”
The NPA could bring significant changes in the landscape, agreed Somya Patnaik, principle product manager at ACI Worldwide. “This will not only consolidate and streamline payment systems but will also allow for competition and innovation.”
This is especially the case for existing systems, such as non-card payment systems, she said. “Some which are supposed to be included under the NPA needed a refresh and there was a need to update those systems to become more robust, modern and flexible.”
Existing payment systems have restricted innovation “to an extent”, she argued. “So, even if there were new capabilities and services introduced in the market, their adoption hasn’t been at the required rate, it has been slower compared to other markets.”
“With the NPA, the market would expect adoption to grow for existing services and also for new services to come in,” she pointed out.
The international perspective
From an international perspective, Patnaik touted the Asia-Pacific region as a promising area for payments modernisation.
“The Asia-Pacific is a real frontrunner with countries such as India and China. UPI in India is definitely at the top of the leaderboard,” she said. “It is undoubtedly the most advanced real-time payments system in the world.”
For example, UPI does around 6bn transactions a month. It has also set up cross-border partnerships in the UK and France.
“There are several learnings that the UK can take from markets like India, for example, simplicity and interoperability in the payment platform that is making UPI what it is today.”
UPI’s payments innovations have brought about convenience and simplicity, ultimately leading to adoption, she said.
Patnaik continued to point out that UPI partially owes its success to incentive programmes initiated by the Indian government and payments regulator to get people to adopt UPI. “This has made more of the traditional merchants move to real-time payments.”
However, in the UK, there are not many incentives currently, she said. “The entire ecosystem needs to be incentivised, whether it is consumers, merchants, banks or financial institutions. We need to make the ecosystem more commercially viable for all the players to come in and anticipate.”
It is worth pointing out that among these UPI incentives to which Patnaik alluded is a mandate by the Indian government that effectively creates a zero cost for merchants accepting UPI.
Such incentives are not designed for the “entire ecosystem”, but were largely an attempt to grow non-cash payments in the country, which is still very low.
Although UPI is the largest global instant payments system in terms of absolute volume of transactions, on a per capita usage basis it is behind many other leading markets, including Thailand, Sweden and even the UK, according to VIXIO analysis.
