The Payments Strategy Forum (PSF) published its New Payments Architecture (NPA) Design and Transition Blueprint on 13 December 2017.This is an updated version of the Design and Transition Supporting Document published in July 2017 and incorporates input from the PSF's consultation feedback and subsequent discussions with industry stakeholders.
Key features of the NPA
In order to achieve its core design principles, the PSF has recommended that the NPA adopts a layered approach to ensure a timely rollout with minimal impact on users, facilitates the emergence of overlay services such as Request to Pay, allows for innovation, adopts common messaging standards to enable interoperability, encourages push payment models to provide simplicity and increase customer control, outlines a clear roadmap as part of a stable transition model and maintains the UK's reputation in the payments space via a common security standard for all NPA participants.
The Blueprint also contains an updated analysis and description of the Application Programming Interface (API) and message flow for the NPA, while detailing amendments around the definitions to consent and authorisation store components and attended and unattended systems. In addition, the PSF has provided further analysis around messaging formats, outlined design principles for multi-vendor options and provided additional enhanced data use cases.
The future of Direct Debit in a "push payments" world
There had been concerns expressed by stakeholders in the consultation feedback that the move towards push payment models could impact on the functioning of Direct Debit. The PSF has sought to assuage these concerns by highlighting that they expect Direct Debits to continue in their current form for a transitional period, with Payment Services Providers (PSPs) eventually executing Direct Debit requests on a payee's behalf by converting them into push payments.
The Blueprint will be handed over the New Payment System Operator (NPSO), who is responsible for undertaking the next phase of design work for the key areas in focus. The final NPA must satisfy the Payment System Regulator's objectives of promoting competition, addressing customer detriment, limiting disruption to service users and ensuring the continued stability and resilience of the payments system.
The key phases of the NPSO's design work can be divided into:
1. Architecture and Payment Processing
This covers the role of Third Party Service Provider (TPSP) routing, the validation and disaggregation of payment files in place of retail payments system operators, the control of CASS during the validation process that TSPPs are handling, the impact of replacing Bacs "A-messages" with a new interface, the potential clearing cycle for Direct Debits and Direct Credits and the identification of any additional detriments within existing retail payments system operators' services.
2. Legal Activities
These will be initiated by the NPSO in 2018 in order to assess the impact of the NPA on existing payment instruments, particularly Direct Debit.
3. Service User Processes
This includes the role of receiving PSP aggregating payment files instead of retail payments system operators, the impact of the reconciliation process for large corporates and government departments, the identification and process alignment for Grade 3 government Direct Credit submitters and the design of economic and practical models for delivering services.
The NPSO will consider assurance and liability issues in order to ensure the wider resilience and security of the system.
The final phase will focus on the ownership and control of retail payments system operators' services, including ISA transfers, bulk redirection, affiliate training and service user audits.
Further payments initiatives
The NPA Blueprint has been published before the Second Payment Services Directive (PSD II) comes into force in the UK on 13 January 2018. In addition, the UK's Competition and Markets Authority Open Banking initiative is set to deliver its Application Programming Interfaces in January 2018 which will make it easy and safe for bank customers to share their financial records with third parties. We are monitoring these initiatives closely and, in addition to the work of the PSF, will keep you informed of developments in this dynamic space.