On an average day, RTGS settles around £500bn between banks

On an average day, RTGS settles around £500bn between banks

The Bank of England (BoE) has released its blueprint for a renewed real-time gross settlement (RTGS) service for payments in the UK – with plans to interface with blockchain and deal with APIs.

On an average day, BoE says RTGS settles around £500 billion between banks – around a quarter of the UK’s annual GDP – in sterling central bank money.

The renewed RTGS service is designed to respond to a lot of things. Namely, the changing structure of the financial system, meet user demand, build capacity to interface with new technologies, react to cyberattacks, and support the evolution of regulatory and monetary policy tools.

Andrew Hauser, BoE’s executive director for banking, payments and financial resilience, says its reforms will be “increasing resilience, broadening access and expanding functionality”.

The 30-page blueprint also includes plans, by early summer, to finalise its framework for expanding RTGS eligibility to non-bank payment service providers (PSPs). The BoE governor Mark Carney announced in June 2016 that it intends to extend direct RTGS access to these PSPs.

BoE cites the introduction of ISO 20022 messaging, alongside similar reform in retail payments being driven by the Payments Strategy Forum, that “will ensure that the UK is part of the global adoption of this standard”. The system will be designed to interface with distributed ledger technology in future.

RTGS will be capable of “near 24 hour operation” during business days from the outset, with short settlement windows also potentially available at weekends. It will also have the capability to be upgraded to full 24×7 operation subject to future demand. BoE adds that it will also introduce an external facing API.

In terms of financial stability, the bank has concluded that this would be improved if the UK’s high value payment system (HVPS) adopted the direct delivery model. This conclusion has been “endorsed” by the Financial Policy Committee, and responds to recommendations made by the IMF.

This means the bank will become the HVPS scheme operator, taking over from Clearing House Automated Payment System (CHAPS). The aim is to have heads of terms for a share purchase transaction ready by July, with the transition completed in the latter part of 2017.

In terms of the RTGS architecture, the majority of the enhanced functionality is set to be live by the end of 2020.

The full BoE blueprint can be found here.