Implementation into the New Payments Architecture

ISO 20022 is an international standard for payments that enables the exchange of electronic data between financial institutions in a common format.

ISO 20022 is owned by the industry under ISO governance and provides a global standard language for payments with well-defined syntax (structures and rules).

The ‘language’ metaphor extends to the fact that ISO 20022 is commonly referred to as a ‘message standard’, and this is because it enables standard messages structures, like writing an email, as a method of allowing one computer to have a conversation with another.

Pay.UK operates at the centre of the UK’s payments ecosystem. And, as the UK’s leading payments authority, it is best-placed to deliver a first-class payments infrastructure and standards in the UK for the benefit of everyone.

To help enable this, Pay.UK has established a Standards Authority which has the responsibility for setting ISO 20022 standards in the UK and ensuring appropriate conformance to those standards. In due course, the Standards Authority will also work with Pay.UK’s NPA supplier (once appointed) to develop functional specifications that will adhere to Pay.UK standards.

The Payment Systems Regulator mandated the adoption of ISO 20022 in their Specific Directions 2 and 3, which Pay.UK adheres to. With regard to Bacs and Faster Payments, the Directions specifically state: “the first central infrastructure contract competitively procured in accordance with this specific direction should be capable of receiving and sending all relevant messages (used in the payment system) in the ISO 20022 messaging standard.”

In addition, commercial banks, central banks and payment networks in other countries have already invested in enabling ISO 20022 as a common language and, as such, it has become the de facto standard for financial services and payments.

In June 2018 the Bank of England, in collaboration with Pay.UK and the Payment Systems Regulator (PSR), published a consultation on the adoption of ISO 20022 in the UK. In particular, an ISO 20022 based ‘Common UK Credit Message’ (CCM) was proposed, to be to be implemented across both CHAPS and the NPA (as the replacement for Bacs and Faster Payments).

The CCM provides standard definitions, structures and rules for payment service providers (PSPs) and end users with regard to the inputting of data into a payment message.

At present, CHAPS, Bacs and Faster Payments all have separate information requirements, methodologies, formats, standards and rulebooks for constructing a payment in each system. This creates numerous inefficiencies, including making it difficult and expensive to move customers’ payments between the different payment systems. It also makes it challenging for new providers seeking to become participants of these payment systems, owing to the costs associated with simultaneously using many different standards.

At the beginning of 2019, Pay.UK’s Standards Authority recommended to the NPA Programme that it would develop the core clearing and settlement standard for the NPA. This became known as the NPA core standard and it is our initial view of ten ISO 20022 messages, including the CCM, which will form the standardised functionality of the NPA core clearing layer.

(Functionality of the NPA core covers more than just the credit transfer element. Therefore, other ISO 20022 messages are required that specify the messaging requirements for other process flows, such as: clearing and settlement, cash management (liquidity) and data reporting capability.)

Pay.UK has been working with the Bank of England regarding the implementation of ISO 20022 in the UK since 2017.  In June 2018 the Bank of England, in collaboration with Pay.UK and the Payment Systems Regulator (PSR), published a consultation on the adoption of ISO 20022 in the UK. In particular, an ISO 20022 based ‘Common UK Credit Message’ (CCM) was proposed, to be to be implemented across both CHAPS and the NPA (as the replacement for Bacs and Faster Payments). Outlined in the consultation was a proposed governance structure to support the effective end-to-end adoption of ISO 20022 for payments in the UK.

A Standards Advisory Panel (SAP) was also proposed with the objective of supporting the Bank and Pay.UK in the implementation of payment standards by providing expertise on industry preferences and implications. It is chaired by an independent industry representative and has a broad constituency of participants, solution providers, fintechs and user representatives, such as the Government Banking Service and the British Retail Consortium. Pay.UK has a seat on the SAP.

During 2019, the Panel’s focus has been to support work around delivering the necessary guidance and communications to ensure that industry can prepare effectively for ISO 20022. It is expected that a second phase will focus more on industry readiness, with a possible third and ongoing phase providing advice to the Bank and Pay.UK about the continuing evolution of standards. Also in 2019, Pay.UK established the lead advisory group on standards called the Industry Standards Coordination Committee (ISCC). The Bank of England has a seat on ISCC which helps to establish input as the detail of the ISO 20022 standards for NPA and CHAPS are being developed.

Not directly, no. However, we work extensively with SWIFT and other user communities around the world under ISO governance via the Registration Management Group (which, under ISO governance, is the senior responsible body for the ISO 20022 standard).

Pay.UK is a well-respected part of this community which can, and should, influence how the ISO 20022 standard is used in the UK in a way that maximises interoperability, building on the wealth of knowledge that is accessible to us from our colleagues from SWIFT and other user communities or countries.

The Pay.UK Standards Authority consulted with the industry on the NPA core standard in 2020 and published its findings and direction towards the end of last year. We stated that we would begin publishing technical collateral throughout 2021 and 2022 aligned to specific use cases in close cooperation with our advisory groups, the ISCC and the Community of Developers. To find out more contact us on standards@wearepay.uk.

Via the FPS questionnaire, which is due to complete in August, we are asking participants to indicate to us what ISO 20022-based requirements they want to adopt as part of transition to the NPA. This will help us assess whether the enhancements proposed can be delivered by the CCM building blocks that were set out in the consultation at the end of 2018 entitled ‘A new messaging standard for UK payments: ISO 20022‘.

This evidence will be important in shaping the detailed design of the core standard during the remainder of 2019. Find out more about the FPS transition questionaire.

Following our consultation on the NPA core standard in 2020, our ongoing primary methods of engagement are via the ISCC, the SAP and our Community of Developers forum. We will also continue to signpost information via the Participant Engagement Forum. To find out more contact us on standards@wearepay.uk.

The main challenge is striking the right balance between rich functionality and simplicity. We are aware that complexity may not drive up utility and could make participation in the NPA more challenging. However, we also want to future-proof the NPA core standard by having a sufficient number of enhancements enabled within it from the outset, to avoid having to add functionality during the transition and start-up of the NPA.