Payments Canada asked Victoria Cleland the Bank of England’s Executive Director for Banking, Payments and Financial Resilience to talk about the impact that a new generation Real‐Time Gross Settlement (RTGS) system will have on transforming electronic payments in the United Kingdom and the projected value of using the ISO 20022 messaging standard, which is planned for both the renewed RTGS system and CHAPS - the UK’s High Value Payment System.
What effect do you think the renewed RTGS will have on the payments industry?
The new RTGS system will deliver a wide range of benefits for the payments industry and the UK more widely. These include:
Improved access: We recently widened access to the existing RTGS to non-bank payment service providers: two have already joined this year. The renewed system will further lower barriers to entry by accommodating a substantial increase in the number of account holders and simplifying the onboarding process.
Innovation: The new generation of RTGS will be built with the flexibility to ensure that it can interface with innovative payment technologies and the Bank has already run a Proof of Concept on supporting Distributed Ledger Technologies. We will continue to engage with Fintech firms to keep up to date with innovation in payment technology.
New functionality: We are also looking to introduce new functionality. One idea is the ability to synchronise cash movements in RTGS with the movement of cash or assets in other systems. This functionality could provide an opportunity to reduce cost and risk, improve efficiency, and support innovative new methods of settlement e.g. in housing transactions and cross-border payment.
What benefits do you think ISO 20022 will bring?
The renewed RTGS service, including CHAPS, will use the ISO 20022 messaging standard, and we recently conducted a consultation on how we will adopt this. We are also working with the New Payment System Operator to deliver common messaging across the wholesale and retail payment systems.
ISO 20022 should have a wide range of benefits for multiple industries, including:
Flexibility, Competition and innovation: ISO 20022 can adapt more easily than current messaging standards to emerging technologies and innovation. The new messaging standard should enhance competition and innovation by removing the need for new payments providers to develop bespoke technology to access each system, and we expect that higher quality data in payment messages will lead to product innovation.
Harmonisation: ISO 20022 has been designed to be consistent with the emerging consensus for similar messages in other countries, as well as with the UK retail systems. This will provide efficiency gains for payment service providers that make international payments, positively impacting end-users through reduced costs and increased speed.
Enhanced information: ISO 20022 is capable of carrying more information and in a more structured format. This will help support the detection of fraud and financial crime
About Victoria Cleland
Victoria Cleland became the Bank of England’s Executive Director for Banking, Payments and Financial Resilience in June 2018. Victoria leads the teams responsible for the operation and strategic development of the Bank’s payment system services, including the UK’s Real‐Time Gross Settlement infrastructure (RTGS), CHAPS – the UK’s High Value Payment System, the Bank’s wholesale and retail banking operations, including gold custody, and assessing the financial risks to the Bank’s balance sheet.