Payment Systems Regulator publishes its regulatory framework for the New Payments Architecture (NPA)

Today the Payment Systems Regulator (PSR) publishes its regulatory framework for the renewal of the UK’s interbank payments infrastructure that allows people and businesses to make payments from one payment account to another. 

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

Taking account of the responses the PSR received, today the regulator is publishing the regulatory framework it will implement to address the risks identified. 

Chris Hemsley, Managing Director of the PSR, said: “The NPA is a significant opportunity to deliver an interbank infrastructure that meets the diverse and evolving needs of everybody who makes payments. Our work here is essential to make sure these systems are future proofed and work well.

“This framework provides clarity around the requirements on both Pay.UK and a provider of NPA central infrastructure services and their respective responsibilities to deliver a competitive payments market to the benefit of both people and business.”

The NPA is one of the biggest changes happening in UK payments. Whether paying employee wages, or transferring money to a friend using online banking, interbank payments are a key part of everyday life for businesses and consumers alike. 

Delivered well, the NPA can boost competition in payment services that meet the needs of people and businesses. For this to happen, market participants need confidence that there is a level playing field and that the central infrastructure services (CIS) underpinning the NPA support competition and innovation.  

In February the PSR consulted on proposals for the regulatory framework. Today, the regulator confirms these proposals by setting out more detail to provide clarity on the steps the PSR will take to guard against risks a CIS provider distorts competition or stifles innovation.  

The framework addresses these risks to competition 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 takes account of 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 has a significant interest in another payment system, or in overlay services, the CIS provider functions must be operationally separate from other parts of its (or its affiliate’s) business. 
  • If a CIS provider has no such interests, it must notify the PSR 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, the PSR has also published illustrative directions to highlight how the directions it plans to give to implement its regulatory framework could look.  The PSR is not consulting on these illustrative directions, but the regulator plans 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.