new payments architecture (npa) faster payments (fps) … · npa faster payment questionnaire v1.0...

New Payments Architecture

(NPA)

Faster Payments (FPS)

Transition to the NPA

Participant Questionnaire July 2019


Pay.UK

NPA Faster Payment Questionnaire v1.0 of 17

Contents

1 Executive Summary ............................................................................. 3

1.1 Introduction ........................................................................................................................... 3

1.2 Purpose of Questionnaire ...................................................................................................... 3

1.3 Completion Guidance ............................................................................................................ 4

1.4 What’s not included ............................................................................................................... 4

1.5 Output and next steps ............................................................................................................ 5

2 Background and Context ..................................................................... 6

2.1 Programme Overview ............................................................................................................ 6

2.1.1 NPA Core Outcomes ........................................................................................................... 6

2.1.2 Programme Status ............................................................................................................. 6

2.2 Transition options .................................................................................................................. 6

2.3 FPS Transition Approach explained ...................................................................................... 7

2.3.1 Summary ............................................................................................................................ 7

2.3.2 Conceptual View ................................................................................................................. 8

2.4 Summary of Advisory Group process .................................................................................... 9

3 FPS Transition Questionnaire ........................................................... 10

3.1 Transition Approach............................................................................................................. 10

3.2 IS020022 Adoption for Transition ........................................................................................ 11

3.3 Other Considerations ........................................................................................................... 12

Appendix A: Transition options discussed with Transition Advisory Group ....................................................................................................... 15

Appendix B: Glossary .............................................................................. 17


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1 Executive Summary

1.1 Introduction

The New Payments Architecture (NPA) is a new conceptual model for the future development of

the UK’s shared retail payment infrastructure. It will be the biggest change to the way payments are processed in the UK since the 1960s, ensuring payments are safe while also encouraging competitive innovation and unlocking new business opportunities in everything from smarter uses of banking and payments data through to new transactional services.

The NPA programme will ultimately enable the transition of existing Faster Payments, Bacs and potentially cheque payment traffic from their current infrastructures to the NPA.

This questionnaire focuses on the first of those transition phases - Faster Payments (FPS) traffic to

the NPA infrastructure.

The transition of other retail payment systems (Bacs and ICS) will be subject to separate

consultations at a later date.

1.2 Purpose of Questionnaire

To prepare for such a large, systemically important transition we established the Transition

Advisory Group, formed of representatives with experience from across the payments ecosystem,

to test our thinking and help us to gain a fuller insight into the opportunities and threats posed by

this scale of industry change. This group analysed of a number of conceptual migration options to

assist us in our evaluation of the optimum way to transition Faster Payments against our agreed

Migration Principles:

We are now seeking feedback from the wider participant community to capture thoughts and additional considerations to help the NPA shape the optimal approach to transition Faster Payments to the NPA. Industry engagement on transition is being initiated early in the NPA’s

lifecycle because we acknowledge, and wish to mitigate, the significant challenges the industry

will face during this exercise.

robust & resilient – our approach will always give priority to the stability and safety of our payments infrastructure

efficient – we will deliver the most economical & fastest path to migration within our risk tolerance

end user focussed – our customers will remain at the heart of our approach, no adverse impacts for our end users

competitive – our approach will ensure that vendors and participants will be able to operate competitively

innovative – we will encourage innovative solutions and embrace 3rd party overlays in a competitive environment

collaborative – all participants and user groups will have the opportunity to provide insight into our transition plans


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The purpose of the FPS Transition Questionnaire is to:

1. Communicate the approach recommended by the Transition Advisory Group for FPS and seek wider participant feedback

2. Determine indicative timescales for participants to transition their FPS volumes to the NPA and preferred throttling methods

3. Gain wider participant insight to support the recommended ISO 20022 implementation approach for transition

4. Provide the opportunity for feedback on broader transition considerations, in particular feedback is invited in the key area of transition incentives for participants

The questionnaire will be distributed to a wide range of current and potential participants including but not limited to existing Faster Payments Service Direct Participants, including settling and non-Direct Participants, Indirect Participants, aggregators and organisations that have

expressed an interested in (or are in the process of) joining the Faster Payments Service.

The questionnaire will be made available to the broader participant community via the Pay.UK website.

1.3 Completion Guidance

The questions will require input from business, operational and technology stakeholders within

your organisations. Organisations should engage with end-users or corporate clients as required to seek their input to some of the questions. We have allocated a six week window for

respondents to submit responses to us.

The deadline to complete and return your submission is close of business on Friday 16 August

2019.

Please email a copy of the response sheet to [email protected]. To help us review

and assess responses, we ask that you submit your responses to us in Word or Excel format.

If you have any questions or need any clarification during this period, please email -

[email protected].

1.4 What’s not included

There are some ‘out of scope’ topics which we have intentionally chosen not to include in this

questionnaire. These topics will be discussed with participants once more is known about the NPA Core design and development timelines have been formalised in the procurement process.

The excluded topics are: 1. Transition start and end dates 2. Implementation planning and readiness criteria

3. FPS Direct Proposition (DCA/FIM)

4. On boarding onto the new NPA system 5. Legal and regulatory considerations

mailto:[email protected]

mailto:[email protected]


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1.5 Output and next steps

We have allocated a four week period following the receipt of completed questionnaires to analyse and summarise the outputs. These will be reviewed and the resulting analysis and

response created by the NPA Transition Workstream will be reviewed and approved through the

Pay.UK governance process. Once complete, the output will be released to the wider payments industry. We will treat responses to the questionnaire as not being confidential unless you mark specific information as being confidential. Where outputs are shared externally they will be

anonymised and/or aggregated.

The majority of the output will flow into a period of detailed transition planning for FPS. Any views

that you may have on the approach to ISO 20022 implementation for transition are also important

for the Pay.UK Standards Authority to consider as it moves forward to define the approach to

implement ISO 20022 for all relevant interactions for payment, clearing and settlement across the

NPA infrastructure.


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2 Background and Context

2.1 Programme Overview

2.1.1 NPA Core Outcomes

1. A new standard; the wider global industry is committed to the ISO 20022 standard, which will

be a key enabler for future innovation including richer data. It is therefore essential that we move the interbank retail infrastructure to that standard, to ensure the UK remains a world leader and to facilitate access.

2. Infrastructure renewal; the time is right to renew the retail payments infrastructure in order

to maintain the UK’s position as having a world leading payment system. The world has now

caught up with FPS, and it’s time for the next step.

3. Robustness & resilience; a wide debate is currently taking place around FMI resilience and using the concept of impact tolerance to guide our thinking in what to strive for. The next generation of the UK’s retail payment system will be informed by that debate. This includes

structural incentives to drive down poor consumer outcomes such as APP fraud.

4. Enabling competition and innovation; we need to build a clearing and settlement system that enables competition and innovation in the wider ecosystem. This is our key takeaway from the ecosystem vision set out by the PSF. It’s not our job to deliver the whole ecosystem, but we should

enable it where and as appropriate.

5. Future proofing; it’s a once in a generation time for payments innovation with new entrants

including challenger banks and fintechs driving new end user offerings. This, coupled with

industry wide innovations like Open Banking, has the potential to drive a significant shift in traffic

toward our system. We must be ready for that.

2.1.2 Programme Status

Throughout 2019, the NPA programme will be undertaking a detailed procurement process to assess and ultimately select a vendor capable of delivering the mission critical functionality required by the NPA; collectively referred to as the ‘NPA Core’.

Unlike past centrally-led programmes of work the detailed design of the new service will not be agreed before the vendor procurement process begins. Instead, the details of the solution will be

agreed jointly between Pay.UK and the vendors during the procurement process. This approach

provides an opportunity for the vendors to utilise their previous experience and knowledge of the

latest global payment developments to focus on presenting solutions that maximise the potential

for innovation within the NPA.

In parallel to the procurement and design work, the Transition Workstream was established to

begin analysing how to transition payment volumes from the existing Pay.UK systems to the NPA.

2.2 Transition options

The Transition approach set out in the Blueprint has been reviewed against a number of alternatives to achieve a view as to what might be the most suitable option. As a result, three transition options have undergone a thorough review process with the Pay.UK Standards, Pay.UK


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Architecture and NPA Design teams. They have then undergone detailed reviews with the NPA

Transition Advisory Group. While this questionnaire focuses on the recommendation from the Transition Advisory Group, a final decision on the transition approach for FPS will only be

made by Pay.UK in due course in the light of the feedback received to this Questionnaire.

2.3 FPS Transition Approach explained

2.3.1 Summary

The transition approach, referred to as ‘All Receive, then Send,” has been recommended by the Transition Advisory Group with a supporting recommendation that appropriate incentives be

introduced to ensure adherence to transitioning timelines.

In this scenario, participants will evidence their capability to receive NPA payments. Once all

participants confirm their readiness, all FPS enabled sort codes will be enabled for the NPA and participants can begin transitioning their ‘send’ volumes.

Indirect participants who own sort codes would need to ensure these have been enabled by the

organisation providing them with direct access. Direct participants would be responsible for

ensuring any indirect participants are ready to transition to the NPA.

Using this approach, sending participants can have confidence that payments will be received and

processed by receiving participants. The recommended approach reduces the need for throw-

away build, ensures a ubiquitous NPA proposition for all participants and avoids the need for

complex technical workarounds to be introduced for the period of Transition.

To enable this approach, ISO 20022 message standards will be provided by the Pay.UK Standards

Authority that will emulate as closely as possible the existing FPS (ISO 8583) data sets and message constructs. As FPS is based on a variant of the ISO 8583 standard, it will not be possible

to replicate precisely the formats of FPS ISO 8583 messages in ISO 20022, and as such some change is to be expected. Members of the Transition Advisory Group consider that this approach –

close emulation to existing FPS data sets and message constructs - will minimise the development required by participants to migrate.


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2.3.2 Conceptual View

The recommended transition option requires all participants to connect to the NPA and confirm

their ability to receive ISO 20022 messages defined for real time payments.

Fig.1 All receiving parties can receive an ISO 20022 message from the NPA

Once all participants are ‘Receive Ready’, they will enable changes to their operational and IT

processes to begin transitioning ‘Send’ traffic to the NPA.

Fig.2 - Senders begin to Transition to NPA. Both FPS and NPA will be used in parallel.

When all participants have transitioned their ‘Send’ traffic to the NPA, the FPS Central Infrastructure (CI) will no longer be used and can be decommissioned. This would be the final step

in the FPS transition to the NPA.

Fig.3 - All FPS traffic has been transitioned and the FPS CI can be decommissioned


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2.4 Summary of Advisory Group process

In January 2019 the NPA Transition Workstream inaugurated the Transition Advisory Group (AG) which is a monthly session attended by individuals with a wide variety of experience throughout the Faster Payments ecosystem. The AG includes those with experience working for:

Large Corporate Banks

Large Retail Banks

Small/Medium Retail Banks

Agency Banks

Corporate End Users

Financial Technology (finch) Companies

Payment Aggregators

Direct [and Indirect] Participants in FPS

A brief explanation of our Advisory Group process:

Transition Principles The Transition Workstream defined a set of six principles aligned to the NPA programme’s principles. Transition options were measured against

these principles.

Advisory Groups Monthly sessions focused on agreeing a preferred FPS transition option. Other key areas such as ISO Adoption were surfaced during these sessions.

Bilateral Sessions A detailed walkthrough of the three transition options with each AG

member

Options Deep Dive An all-day workshop was held in mid-March to review all three FPS Transition Approaches and measure each against the Transition Principles. The output of this session was a recommended FPS Transition approach.


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3 FPS Transition Questionnaire

3.1 Transition Approach

No. Question Answer Options

1

Participants will transition ‘send’ payment

volumes from FPS to the NPA over a period

of time. What characteristics would you

envisage being used to determine how

payment traffic is routed to the NPA?

Please select which characteristics you would use

to control the phased transition of volumes to the

NPA. For those you select, please rank them from

most to least important (1=Most Important).

o Originating sort code

o Initiation channel

o Payment type (i.e. SIP, FDP, SOP)

o Value

o Other (please specify)

2

Assuming each participant controls the rate

at which their own transition occurs; how

many tranches would you envisage utilising

to transition your entire send volumes.

Please specify an approximate number of tranches.

3

The anticipated duration of FPS Transition is

12 months although some organisations

may require longer.

How long do you believe it would take your

organisation to fully transition all of your

Faster Payments volumes to the NPA?

Please specify an indicative amount of time you

think it would take your organisation to transition

all send volumes to the NPA.

4

The NPA solution may be able to

accommodate mid-week changes to key

reference data unlike the weekly process

used today (i.e. EISCD routing changes).

Would you have concerns if participants

were asked to transition ‘Send’ traffic to the

NPA mid-week? If so, what would your key

concerns be?

Please include any concerns with mid-week

transitions.

Please specify the times you would consider

transitioning your FPS volumes to the NPA (e.g.

22:00-02:00).

Please specify the times you would definitely not

support for transitioning.

5

Pay.UK will co-ordinate the overall

transition across the industry. This can be

achieved in a number of ways ranging from

passive monitoring to active management of

each participant’s transition plan.

Please indicate which options you would

support in order of preference.

Please list options in order of preference:

a) Participants define their own Transition

sequence, NPA monitors progress

b) Participants define their own Transition

sequence, NPA performs clash management

and approves sequence

c) Participants provide their preferred Transition

sequence, NPA reviews and produces a central

plan for all participants

d) NPA develops a central plan and assigns

participants to transition tranches

e) Other (please specify)


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6

The ‘All Receive, then Send’ approach

means that participants who are receive-

only would be unable to initiate Return

payments to the NPA. A temporary Returns

process would need to be used during

Transition (e.g. send a Faster Payment).

Do you agree that:

a) Participants should be able to

initiate payment Returns via the

NPA at the start of Transition?

b) Returns should be sent via an

alternative process (FPS) if a

participant is not yet ‘Send Ready’

Please select option a) or b)

Please provide any additional commentary on

either option if required.

3.2 IS020022 Adoption for Transition

The following questions relate to the ISO 20022 messaging standard to be used for the transition of existing FPS traffic to the NPA. Beyond transition Pay.UK Standards Authority will work with the Industry to create message standards and rulebooks to support new propositions and innovation as they evolve.


7

We understand from the Transition

Advisory Group that an approach to

transition which would require you to

implement ISO 20022 message standards

that will emulate as closely as possible the

existing FPS (ISO 8583) data sets and

message constructs will significantly

reduce the time required by you to

complete migration. We expect this to be

beneficial as it would reduce the total time

required to maintain legacy infrastructure

until such time as all FPS participants have

transitioned.

a) We would welcome your views to

confirm our understanding that

this approach will de-risk the

technical complexity of the ISO

20022 migration step for you?

b) What, if any, alternatives would

you propose that will minimise the

time required to transition?

Please provide details and include supporting

rationale.

8

In line with the objectives of Pay.UK to

catalyse market innovation and

competition, we expect that you will want

to tell us about the ISO 20022 based

enhancements you would like to see

introduced.


rationale.


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We would like to understand from you the

following:

a) A summary of the ISO 20022

enhancements you would like to

see introduced?

b) Whether you would be ready to

implement these enhancements

at the same time as transition, or if

not how soon after transition you

expect to be able to implement

them?

c) Whether all FPS participants

would be required to implement

these enhancements as they rely

on ubiquity, or if a ‘closed user

group’ of participants would be

sufficient?

3.3 Other Considerations


9

During the transition window there will be

a period where settlement of FPS and

settlement of the NPA will be required at

the same time.

The details of the NPA settlement model

have not yet been agreed with the Bank of

England. For the purpose of this question,

please assume that there would be no

solution to share liquidity between the

existing FPS and the NPA payment

systems; instead participants would have

to fully fund both systems simultaneously.

a) To what extent will this influence

your transition scheduling

b) Is there any additional

information that would help you

to manage these positions

c) How significant an impact do you

see this having on your own

operation

Please specify any concerns you have with the

requirement to run two settlement positions.


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10

Appreciating that there are a number of

significant industry development

programmes occupying a similar window

to the NPA:

a) Are there any factors that will

influence the speed & priority of

your development effort

b) What if anything will support you

in securing the resources you need

to safeguard FPS transition

development


rationale.

11

The preferred transition option ‘All

Receive, then Send’ will mean the

Transition window will only open when the

last participant is ready to receive. If one or

more participant is not ready on time there

will be a knock-on impact to the NPA and

other participants.

What measures would you advocate to

ensure that participants adhere to

transition dates?

Multiple options can be selected:

o Agree industry-wide dates with Pay.UK

o Specific regulatory enforced mandatory dates for

Participants

o Commercial incentives for participants to

transition according to schedule

o Other (please specify)

12

As participants transition to the NPA and

volumes decrease on the existing FPS

Central Infrastructure, there will be a

period where both infrastructures will be

operating in parallel, both with an element

of associated fixed cost.

Participants are asked to provide their

views on the principle of financial

incentives to encourage transition from

FPS to NPA.

Please provide your views on financial incentives to

encourage transition and any thoughts on how this

might be implemented.

13

Participants are asked to illustrate how the

transition of FPS to the NPA will impact

their indirect customers and what

measures, if any, will assist them in that

activity.

Please provide your views and any suggestions for

consideration.


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14

What are the most significant risks to your

organisation’s ability to transition FPS to

the NPA within the allocated window?


rationale.

15

Please use this space to provide

commentary on any aspects of the

Transition Approach not covered by the

above questions.

List any additional comments regarding the

Transition Approach.


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Appendix A: Transition options discussed with

Transition Advisory Group Note: both options outlined below were discounted following a detailed review by the Transition Advisory Group.

Transition Option 2: Routing Determined by Sending Participant

Unlike Option 1 which requires all participants to be able to receive ISO 20022 messages before

beginning transition, Option 2 allows sending participants to initiate payments to sort codes which have been explicitly enabled for the NPA.

This would be achieved by introducing a new piece of reference data, similar to the EISCD, which would indicate whether a sort code is NPA enabled. Senders would consult this reference data and decide whether payments should be routed to FPS or the NPA.

This option would result in transition beginning earlier, as only two participants would need to be ready before payments could be sent. However, it would require changes to participant channels

and back-end systems to determine the correct routing for each payment.

The redirection service introduced as part of the Current Account Switching Service further

complicates this option due to the sending participant not having visibility of switches between other participants. As a result, payments which are sent to the NPA but need to be redirected to a

sort code which is not NPA enabled would fail. Sending participants would have to repair and re-send the payment to the FPS system.


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Transition Option 3: FPS to NPA ‘Overlay/Converter’ Service

Prior to transition, the NPA would deploy an overlay service to enable conversion between FPS

formatted and NPA formatted payment messages; ISO 8583 to ISO 20022. Payments sent to the overlay service in ISO 8583 would be re-formatted to ISO 20022 before being sent to the NPA Core. Likewise, any ISO 20022 messages from the core would be re-formatted into ISO 8583 before

sending the message to the recipient.

Participants who have not been able to develop their ISO 20022 send or receive capability would

connect to the overlay to send and receive in the old ISO 8583 format rather than using ISO 20022 directly with the NPA Core

This option requires a second Transition phase to move participants from the overlay to the core.

The complexity of building an overlay which is able to both re-format messages and coordinate

payment orchestration between a participant using ISO 8583 and the NPA Core is substantial. The overlay would need to replicate the majority of functionality provided by the FPS Central

Infrastructure.

The integrity of any payments being processed by the overlay would also be compromised

because messages would need to be broken open and reconstructed in order to comply with the different security methods used by the NPA Core.

“Big Bang” approach for Transition

This option has been considered both internally within Pay.UK and also with the Advisory Group. It is noted that the Bank of England is advocating this transition method for the RTGS2 implementation and as such it has been examined in the context of NPA. However, given the extremely high volume of payments processed in real time and the 24/7/365 availability of the UK

retail payment systems (significantly different from RTGS2) the risk of transitioning in a single event vs. a phased movement of volume is deemed too great to progress as a preference.


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Appendix B: Glossary Term Meaning

FPS / FPS CI Faster Payment Service / Faster Payment Service Central Infrastructure

NPA New Payments Architecture

Participant Any organisation or user participating in the Faster Payments Scheme

ISO 8583

The international standard for financial transaction card originated interchange messaging. It is

the International Organization for Standardization standard for systems that exchange

electronic transactions initiated by cardholders using payment cards.

ISO 20022

ISO 20022 is a multi-part International standard prepared by ISO Technical Committee TC68

Financial Services. It describes a common platform for the development of messages. It is a

single standardisation approach (methodology, process, repository) to be used by all financial

standards initiatives. This global messaging standard has been mandated for use in the NPA.

NPA Core The main components of the NPA service used to process payment messages, undertake

settlement and provide critical overlay services

Dataset The mandatory and optional data contained within a given message format (e.g. ISO 20022)

RTGS2

Bank of England Real Time Gross Settlement Renewal programme which is the renewal of the

infrastructure that hold accounts for financial institutions. One aspect of this infrastructure

renewal is the move to the global ISO 20022 message standard.

Transition Advisory Group

The Transition AG attendees are volunteers from a wide range of organisations who supported

the analysis of the NPA Transition approach. Attendees represent themselves and do not

represent their organisations during the AG sessions.

Standards Authority The Standards Authority is responsible for all aspects of standards development, maintenance

and modification across the scope of Pay.UK.

End

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