UK’s Payment Strategy Focuses on Fraud Detection, Instant Payments

UK Focuses on Fraud Detection, Instant Payments

The United Kingdom continues developing its New Payment Architecture (NPA), which will allow financial institutions (FIs), payment providers and other players to access a new payment platform to provide instant payments.

Pay.UK published its new strategy plan March 2 for 2021-2026 where it established its vision on how to build and operate the NPA. Pay.UK is a nonprofit organization supervised by the Bank of England and regulated by the Payment Supervisor Regulator that operates most of the payment infrastructures in the U.K. and it will develop the NPA.

The strategy could be divided into two areas. First, the report established policies that will help to provide better services in existing platforms, where the focus is on fraud detection and enabling better data sharing. The second part of the document set up how to build the next generation payment platform that will allow instant payments and promote competition.

Strengthening safety and security on the different payment platforms to reduce fraud has been a constant priority for Pay.UK, which has been working with the industry to develop rules and standards that work for everybody. As a result of these collaborations, Pay.UK, announced Feb. 22 that it had developed a new tool for use in the fight against Authorized Push Payments (APP) fraud. The new “logical data model” serves as a foundation for categorizing relevant customer data that enables both banks involved in processing a payment (the sending bank and receiving bank) to more easily identify a fraudulent transaction.

While this model has been designed to use in existing payment platforms, the model will serve as the basis for a long-term approach to how the industry standardizes consumer data. This will allow payment service providers to improve how they exchange data, ultimately enabling more accurate and faster detection of suspect payments.

On the data sharing front, Pay.UK will continue using open banking rules and standards to share more and better data, which is in line with the government’s strategy on open data. Additionally, Pay.UK will work with Her Majesty’s Revenue and Customs (HRMC), the government department responsible for the collection of taxes, to pilot a data and payment overlay service.

However, the most important priority for Pay.UK remains the development of NPA. The new payment platform will provide new rails for instant payments.

“Reducing the proportion of transactions made by card will benefit the U.K. economy by removing associated costs,” said Pay.UK in the report.

Pay.UK will operate the NPA as a neutral player, and it won’t offer products and services for the benefit of end users. Its main goal will be to ensure the platform is robust and resilient, and it will set rules and standards to ensure access for most companies. Yet, it won’t compete with any of these companies, and it won’t change their business models.

The implementation of the NPA has been slower than initially planned, but it is still moving forward. Pay.UK has yet to launch a public bid to choose the company that will build the infrastructure.

In the meantime, the Bank of England updated the timeline to migrate to the ISO 20022 messaging standard. This migration to the new ISO standard will facilitate the use of the NPA. However, the cutoff date from using the old system has been moved to April 2023 from June 2022.

Read more: UK Is Moving to Open Banking 3.0