The U.K. is answering the call for real-time payment reforms due to shifts, including a major increase in digital payments, competition from non-traditional lenders, and fraud, in the payments industry.
In response to all of the ever-evolving industry, The Bank of England will upgrade the U.K.’s Real-Time Gross Settlement (RTGS) system. In a completely separate move, Pay.UK, the country’s payments authority, plans to create a New Payments Architecture, updating Britain’s Faster Payments real-time retail system. Additionally, the bank and Pay.UK also will implement the ISO 20022 standard to provide richer information for fake checks for suspicious payments and AML compliance.
The Bank of England’s Plans
To offer access to a larger pool of firms, the Bank of England wants to create a RTGS service that reroutes payments with interoperability and flexibility in mind. It aims for the service to provide better functionality, and possibly make it available all day, every day.
The European Central Bank’s RTGS platform, which was launched in 1996, also is getting a facelift. The new version of RTGS would be fully operational by 2025. The platform is used by U.K. retail and financial markets payment networks to settle transactions between their member banks and other financial institutions. To compete better, the platform was made available non-financial institutions, such as TransferWise, making them members of Faster Payments, which was launched in 2008.
Reasons for the RTGS Makeover
The new technologies that are transforming the payments industry also are opening payment systems up to new threats from cyberattacks, as well as operation disruptions due to major transaction volume increases. To better protect and make the infrastructure more resilient, the RTGS is being revamped.
Part of the system’s facelift, may include synchronized settlement, which is when the transfer of two assets is linked. This ensures that the transfer of one asset occurs if and only when the transfer of the other asset also occurs. The Bank of England, which wants to overhaul CHAPS to allow for new entrants, believes synchronization could decrease cost and risk, improve efficiency, and support innovative new methods of settlement. For this to be part of the rebuild, the Bank of England would need to get third parties to create them.
Making this part of the rebuild would be very helpful for the Bank of England since it has been accused of taking too long to allow non-bank payment services providers (PSPs) into RTGS. The bank has said regulations and infrastructure are what make the process so slow. It often takes one year to integrate a PSP into the system. Rebuilding the system would certainly speed up the process and make it more available to other entrants.
The Last Word on the Matter
Noticing changes and adjusting accordingly is something that more businesses in general need to do. The UK has noticed that the payments industry is going to continue to evolve and that’s why he need to make big changes to accommodate it. Creating greater access for fintechs and promising secure transactions will be the best ways for major banks to stay competitive.
Apply for a Merchant Account
If you are a merchant that needs merchant services in the UK, then turn to eMerchantBroker.com (EMB). It works with high risk businesses and offers customized payments solutions. Begin today by using its simple online application process. Eligible merchants get approved in as little as a few days.