NPA: modernising payments in the UK – ACI Worldwide exclusive interview

Friday 27 October 2023 10:53 CET | Editor: Vlad Macovei | Interview

We sat down with Richard Albery and Andy Morris from ACI Worldwide to discuss the UK’s New Payments Architecture (NPA), its goals and propositions, and how companies such as ACI adapt to the new initiative.

ACI's Richard Albery and Andy Morris discuss the UK’s New Payments Architecture (NPA), its propositions, and how companies adapt to the new initiative.


Please elaborate on the specific contributions and initiatives ACI Worldwide is involved in to support the NPA's goals of modernising the UK's payment systems and infrastructure, ensuring smooth interbank payments, and promoting innovation?

Richard Albery: I'll begin with a brief overview of the programme we're running. If there's one key message, it's that we're leading the market in embracing  New Payments Architecture (NPA). Our advanced position is confirmed through supply readiness questionnaires, which we, along with all other suppliers, submit to Pay.UK. Currently, we're in the initial phase of testing, known as Self-Validation Testing, with Pay.UK. We don’t believe that any other supplier nor possibly the majority of existing FPS participants  are in this testing phase now and we’re only able to do this due to our extensive experience with ISO 20022 schemes and FPS since scheme inception.  Our commitment to the NPA isn't recent; we made a clear investment early in 2022. This commitment extends not only to Faster Payments but also to the broader NPA framework. Our first code release is scheduled for December 2023 using specifications that have been released by scheme, and it will be available on our multi-tenant cloud-hosted platform, our SaaS offering, which ACI manages for our customers in late March/early April 2024. Many financial institutions are grappling with the question of whether to commit to the NPA now or wait for more certainty with the release of specifications and naming of the central infrastructure provider. Our strategy is to continue based on our knowledge and experience with the Faster Payment scheme since 2008.

Andy Morris: To provide further insight, let me share that ACI has been actively engaged in the central infrastructure discussions with Pay.UK and its predecessor, the National Payments Systems Operator. When they first expressed the need for a new central infrastructure provider, we participated in the selection process and formed a consortium. Through this process, our own direct participation in scheme working groups and with our partnerships, we have developed a deep l understanding of compliance and institutional solution needs. We have a partnership with Mastercard, the current incumbent Faster Payment CI provider. Furthermore, we support nine Clearing and Settlement Mechanisms (CSMs) globally in delivering instant payment schemes. ACI either provides the central infrastructure solution for these payment rails or contributes to the central infrastructure process. These contributions distinguish ACI in this field and highlight our commitment to the UK's payment infrastructure.

Regarding initiatives, I'd like to share two examples of our collaboration with Pay.UK:

  • First, we played a significant role in shaping their cloud strategy, with our chief architects sharing our experience in this domain. Pay.UK published their cloud strategy with our input. 

  • Second, we've been actively involved in the fraud score initiativeand are closely monitoring the results of the initial pilot. 

I also want to emphasize our involvement in the account-to-account preliminary workshops with Pay.UK and their roadmap development team. This collaboration includes well-known third-party brands and aims to advance the use of account-to-account payments, especially for merchants and small businesses.

Lastly, I want to mention our participation in the Industry Advisory Council (IAC). ACI is a member of this council, which is designed to ensure that Pay.UK's board aligns its ambitions for innovation beyond the initial NPA framework. This involves considerations such as the future of banking and account payments. The Industry Advisory Council plays a vital role in helping Pay.UK set its priorities and ambitions correctly. ACI is an active contributor to this council.


Why was the NPA necessary to begin with and what are its goals?

Richard Albery: I’ll answer this in part, with an analogy. In today's highly connected world, we can easily hop on a non-stop flight at Heathrow and travel directly to Australia. This level of connectivity is made possible because of advances in fuel technology and competition among various airlines, which drive innovation and new services. Whilst liveries and services might be different airline to airline, there is a common language and a set of global aviation standards that the entire world adheres to. Additionally, there's a consistent airport infrastructure and passport security worldwide. Now, this analogy may seem unrelated, but it highlights the current challenge in the payments industry.

Historically, different messaging formats for payments were used across the world, which means that sending payments to different regions requires specific messaging standards. However, these standards were not interoperable nor enabled for truly instant payment. FPS message formats also restrict what data is available, limiting use cases and the potential for new everyday banking consumer propositions. Globally, the adoption of instant payments is growing, both domestically and across borders, with the uptake of the ISO 20022 standard. To make the analogy relevant to payments, the NPA aims to modernise messaging formats so that instant payments can flow, not only domestically but also cross-border, using the globally adopted ISO 20022 standard. This shift is crucial for several reasons.

Faster Payments in the UK was launched back in 2008, making the UK one of the early adopters of instant payments. However, it has not witnessed the expected growth, standing at only about 10% adoption within the UK. To illustrate the significance, consider the case of Bahrain, where it is forecasted to have 80+ instant payments processed, per head per month by 2027, up from their current 20 transactions per head. This rapid and incremental growth allows funds to flow instantly across markets, increasing liquidity for merchants, central infrastructures, and economies whilst also delivering a far richer instant digital experience for consumers. This improved liquidity enables faster settlement and movement of monies for reinvestment. Furthermore, ISO 20022, the new standard for NPA payments, opens up a range of new use cases for merchants, consumers, and businesses, especially regarding account-to-account payments. QR code payments, like those typically adopted in APAC countries, become viable options.

Andy Morris: Adding to that, it's important to understand Pay.UK's ambitions. Various trade bodies, trade associations, and regulatory bodies shape the UK payments industry, with the Payment Systems Regulator (PSR) being one such authority. The PSR's ambitions encompass access, protection, competition, and the delivery of account-to-account payments, which require the NPA rails. Pay.UK is responsible for delivering these ambitions, and it starts with the NPA. Richard explained that the old Faster Payments messaging format, the 8583 format, is not ideal for carrying rich data. In contrast, the ISO 20022 payload provides a more extensive dataset, including a unique tracker, legal identifier, remittance data, enhanced characters, structured data, and purpose codes. Unlocking this rich data can monetise payments and introduce new payment services in the future, such as embedded and contextual payments.

The goal is to realise these ambitions by providing a safe, reliable, secure, and trusted method of payment. Payment infrastructure is a national essential service, similar to utilities like heating, power, and water. Ensuring the infrastructure's safety, reliability, scalability, and resilience is paramount.

Richard Albery: To further expand on this, in the early days of Open Banking, many banks adopted a compliance only strategy with regulatory requirements. However, as we are currently experiencing with the NPA, the industry is beginning to understand the potential benefits of the new messaging format, as described by Andy. For instance, the purpose code he mentioned opens the door for fintech organisations capable of consuming APIs to develop new digital propositions that simplify everyday banking for consumers. These use cases are yet to be fully explored. The competition aspect is also essential. Account-to-account payments can potentially allow merchants to compete more effectively with dominant players like Visa, Mastercard, and Amex. This competition may lead to lower transaction costs for consumers and new payment experiences.

Consider the example of Uber. When travelling for business, many people prefer using Uber because it streamlines the payment process. In contrast, traditional taxi services often involve waiting in line, providing destination details, waiting for payment, and dealing with receipts for expense reporting. Account-to-account payments and the new messaging format have the potential to enable these kinds of efficient and convenient payment experiences for consumers.


How does ACI Worldwide plan to align its solutions and services with the NPA to benefit businesses and consumers in the UK?

Richard Albery: ACI Worldwide is taking a proactive approach to align its solutions and services with the New Payments Architecture (NPA) to benefit businesses and consumers in the UK. One of the key drivers set by the Payment Service Regulator is to reduce the barriers to access for new and existing banks and building societies. ACI has established a new multi-tenanted easy onboarding platform known as Real Time Payment Cloud (RTPC) that facilitates the seamless transition of indirect participants, who currently offer what appears to be instant transactions, to become direct participants. RTPC is designed to reduce access barriers, not only through policy but also through the technology that ACI is bringing to the market.

Andy Morris: ACI's existing footprint in the instant payments and immediate payment space positions it well to deliver NPA capabilities. ACI already serves customers in the UK and globally through its enterprise payment platform. The NPA functionality is essentially a configuration module that adheres to the Pay.UK specifications. This module meets both functional and non-functional requirements as defined in the scheme rule book. It can be deployed either on-premise in a customer's environment or in a public cloud environment. ACI's enterprise payment platform is renowned for its scalability, resilience, and proven performance, serving over 25 instant payment schemes globally. 

Furthermore, ACI's flexibility extends to the merchant side. ACI offers over 250 alternative payment options for merchants to send and receive payments for goods and services. ACI has also introduced ACI Insta Pay, an instant payments proposition tailored for merchants. This solution allows merchants to receive payments via Open Banking, offering an efficient and convenient payment process, including the use of QR codes. 

ACI's commitment to aligning its solutions and services with the NPA extends to fraud prevention. ACI provides a fraud proposition that safeguards both the paying bank and the beneficiary bank. This is particularly important in light of evolving fraud trends, such as social engineering, account takeover attacks, and mule accounts. The liability shift to a 50-50 split in cases of fraudulent payments is another factor that underscores the need for robust fraud prevention measures.

Richard Albery: Moreover, ACI's Real-Time Payments Cloud platform empowers banks to operate as tenants on a shared platform, offering cost savings and infrastructure efficiencies. This approach enables banks to focus on their core banking functions, such as delivering current accounts, savings products, credit cards, and unsecured loans. ACI's platform, enabled by the NPA, allows banks to address their challenges related to cost-income ratios and investment efficiency. This platform is already operational, with FedNow customers benefiting from its capabilities.


In what ways does ACI Worldwide envision the NPA driving innovation and competition in payment systems and benefiting a diverse range of stakeholders, from financial institutions to local merchants?

Andy Morris: The focus here revolves around the light central infrastructure, which essentially means that fintechs, challenger banks, and traditional banks have the capability to extract data from this central infrastructure. This process involves the utilisation of the six building blocks, as mentioned earlier, which revolve around the ISO 20022 payload, the secure monetisation of data, and the introduction of services. These services often begin with fraud prevention, a domain where significant progress is already being made for both Faster Payments (FP) and with ambitions to do the same for NPA. Open Banking, as Richard mentioned, is an integral part of this conversation, but it's essential to touch on JROC, which has a two-year vision to accelerate progress in Open Banking.

As a reference point, consider the growth in Open Banking over the last two years. Two years ago, there were just over 2 million initiated payments in September. Fast forward, and we are now close to 12 million initiated payments. This growth signifies a level of innovation in the Open Banking space, which is essential. However, it's vital not to repeat the mistakes made in the past, particularly in the context of Request to Pay. We should be cautious about trying to innovate for innovation's sake. Rather, the emphasis should be on allowing external parties, such as fintechs and challenger banks, to develop propositions and services for end customers. This innovation can be facilitated by harvesting data from the light central infrastructure, and the pace of innovation is likely to be faster if it is primarily driven by the external ecosystem rather than by Pay.UK, starting with VRPs (Variable Recurring Payments).

Richard Albery: All these innovations begin with the foundation of the ISO 20022 message. As Andy highlighted, once this baseline is established, fintechs and agile organisations can bring innovative services to the market. ACI itself serves as a robust foundation from which others can build. ACI can also orchestrate its own payments and configurations effectively. Moreover, NPA, with its potential to reduce friction in payments, will improve not only operational efficiencies but also the customer experience, leading to brand adoption, and indirectly contributing more income to banks and building societies. Consider the example of a supermarket where a frictionless experience allows customers to save time and avoid waiting in queues, resulting in a superior customer experience. Such frictionless payment experiences can drive customer loyalty.

Andy Morris: In terms of account-to-account payments, the goal is to create an experience that matches or surpasses the convenience of contactless payments for cards. This vision involves wearables and face recognition technology, allowing customers to complete their purchases without going through traditional checkouts. Payments can be initiated in the background through interbank transactions. Achieving this level of innovation requires time, thought leadership, and iterative prototypes.

Richard Albery: The primary challenge faced by the industry in these payment innovations is twofold: the cost per transaction and the time taken to execute transactions. To ensure widespread adoption, these payments should be as fast and cost-efficient as existing card transactions. For instance, when dealing with transport systems, like the London Underground, it's crucial to avoid queues forming at turnstiles due to slower payment processing. Additionally, the cost of processing these transactions should align if not be lower than the costs associated with card payments. 


What steps or measures is ACI Worldwide taking to ensure that the NPA's development is resilient, secure, and aligns with the long-term goals and interests of service users, and how does ACI plan to collaborate with regulatory bodies like the Payment Systems Regulator (PSR) and the Bank of England in this process?

Richard Albery: Resilience is a fundamental right for consumers. People expect their money to be accessible 24/7. ACI understands the importance of not only delivering functional solutions but also addressing non-functional aspects like failover, performance, and availability. ACI has been in business for almost 48 years and has been involved with Faster Payments since its inception in 2008. All of ACI's technical systems are designed to have no single point of failure, and they consistently exceed Pay.UK scheme SLAs. This heritage and experience allow ACI to provide not only functionally strong but also highly resilient, available, and always-on products to the market. This resilience is essential for building trust with both banks and consumers.

Andy Morris: The Enterprise Payment Platform, the foundation for RTPC, offered by ACI is a proven platform known for its non-functional requirements. For NPA, ACI delivers a configuration module that aligns with scheme rule books and specifications. ACI also works in close collaboration with various industry bodies and trade associations, such as UK Finance and the Bank of England. This partnership helps remove barriers to access and settlement accounts, making it easier for financial institutions, including fintechs, to access central bank money. ACI is actively part of stakeholder conversations with the Payment Systems Regulator (PSR) and other organisations, with the goal of expanding payment choices for consumers, merchants, and businesses.

Additionally, ACI is involved in discussions with the Bank of England and has delivered ISO 20022 projects for participant banks. The focus is on shifting the emphasis from card payments to interbank payments. This shift will provide consumers and businesses with a broader range of payment options in the UK and beyond.

Richard Albery: Multi-cloud resilience is another important aspect that ACI is considering. The ability to failover from a public to a private setup offers an additional layer of resilience, especially in cases of significant disruptions, whether technological, political, or commercial, that may affect major cloud service providers. This multi-cloud approach adds to the overall resilience of payment systems.

Andy Morris: To address the growing concern of operational risks, ACI follows PS6/21 guidelines, endorsed by both the Bank of England and the Payment Systems Regulator (PSR). This involves understanding critical business services, mapping them to risk tolerances, and being prepared for various scenarios. It's about testing these preparedness measures and ensuring that in the event of a catastrophe, systems can failover to alternatives seamlessly, ensuring continuous service even in challenging circumstances.

About Richard Albery

Richard is responsible for technical, scheme, and business consulting of ACI solutions with Financial Institutions and Intermediaries in the UK & European markets. With his blend of payment domain, programme delivery, and market procurement experience, he builds and maintains strong client relationships to truly understand their business value and configure solutions that deliver real performance. Richard’s unique payment experience spans ACI as a leading technology provider and from directly within Financial Institutions and UK schemes.

About Andy Morris

Andy has extensive payments experience that spans over 3 decades. His expertise ranges from financial crime and payment processing to instant and real-time payments. In ACI, Andy has held several senior roles, with the most recent focusing on driving growth in Europe and the UK. Prior to ACI, Andy worked with Barclays Bank which gave him practical payments experience where he represented the bank at APACS, the UK payments association. Andy is also a representative on Pay.UK’s Industry Advisory Council (IAC) as well member of the UK’s Fraud Advisory Panel.

About ACI Worldwide

ACI Worldwide is a global leader in mission-critical, real-time payments software. Our proven, secure and scalable software solutions enable leading corporations, Merchants, fintechs and financial disruptors to process and manage digital payments, power omnichannel payments, present and process bill payments, and manage fraud and risk. We combine our global footprint with a local presence to drive the real-time digital transformation of payments and commerce.

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Keywords: online payments, account-to-account payment, Variable Recurring Payments, regulation, real-time payments
Categories: Payments & Commerce
Companies: ACI Worldwide
Countries: United Kingdom
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Payments & Commerce

ACI Worldwide

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