Considerations for NPA: How to decouple the technical project from the migration programme.

As laid out by Pay.UK in their Consolidated Design & Impact Document (issued Dec 2021), there are multiple phases in the end-to-end NPA delivery which each Participant is required to go through and provide requisite scheme approval to achieve defined readiness criteria. This includes the following:

1. technical project; the technical infrastructure level for gateway, message formatting, security protocols, process attestation, scheme connectivity, plus accreditation testing of the technical processes etc.
2. migration between Faster Payments and NPA schemes, driven through a phased approach controlled centrally by the scheme.

Using the Form3 platform simplifies the technical challenge and substantially reduces the scheme testing overhead for our clients. The Form3 platform operates as multi-tenant and pivotally is deployed using a single code base across all customers. Form3 provide integration with the customer via utilisation of an abstracted API.

The Form3 approach means that we are able to deploy and test the technical interface once, deploy for any number of our customers, plus due to the API layer, we are the ‘end’ of the inward flows (as the API would be the hook into the core banking system) which allows us to manage a substantial amount of the testing without need for customer Participant involvement, and the results for any of our customers are identical.

The ability to rapidly deploy the technical project not only simplifies the initial delivery activity, additionally it allows the Form3 customer to focus their time on other aspects of the migration programme, therefore we can offer the ability to decouple the technical project from the migration programme. Explained in the following section, the migration programme itself is another area whereby Form3 can provide substantial benefits.

Within the NPA migration programme is the requirement for the Participant to undertake scheme assurance and attestation processes. It is possible a Participant may opt to deploy NPA capabilities in-house, either through acquisition of third party technology or in-house build. The approach, viewed by many as a legacy method, comes not only with the detrimental factors of high initial and continuing operational costs, but also will push the onus onto the Participant for the full end to end Attestation and Assurance process.

Form3’s multi-tenant platform mitigates many of the detrimental factors, allowing our single code base to be reused by all customers, providing lower setup and run costs, and in the context of scheme sign off, greatly simplifies the Assurance and Attestation process as once the necessary cycles have been completed once, they are the same and fundamentally gives the “green light” for all Participants using the platform.

The specific attributes will be defined as the scheme’s own governance and design principles are defined and released, however in summary, as part of a customer engagement, Form3 will:

• Produce revised Security Code Assurance Evidence and Answers
• Update ISO operational process attestations
• Support Technical testing “accreditation” with Pay.UK
• Provide Migration tools and support rehearsals

Indeed, our customers benefit from the use of the service from the outset. Form3 customers are already being provided with supporting information for inclusion in response to the Pay. UK CDID questionnaire; significant swathes of the readiness for NPA is delivered by Form3.

All Participants are subject to similar challenges in terms of multiple work streams, industry mandated changes and compliance burdens. NPA is only one of activity in a long list including the migration to ISO20022, RTGS2 migration, Open Banking to name but a few.

Internal resource constraints for an in-house NPA build could require standing up a team of 10’s or even 100’s of people for NPA, which is a huge overhead. This is compounded when considering the elongated nature of the transition process following the initial implementation and development, which could span two or more years.

Aspects of an in-house development, or deployment of third-party technology within the Participants internal estate which drive up the TCO include:

• Recognition that existing ‘thin’ gateways require expensive in-house build.
• Desire to reduce Total Cost of Ownership (TCO).
• Existing vendor presents a high upgrade and/or incremental running cost
• Dissatisfaction with existing vendor’s service.
• Internal resource costs associated to the programme.

Form3’s service is a multi-tenanted, cloud-based platform, operating on a commercial SaaS basis. Form3 reduce the TCO for NPA by removing the burden of managing costly, evolving, critical payments infrastructure in-house with our fully managed service provision. Our customers may also achieve additional cost reduction through early switch-off of legacy FPS infrastructure.

Within FPS, the service offering to sponsor Directly Connected Non-Settling Participants (DCNSP) has always attracted a lot of attention and interest, however, there has been a technical challenge in terms of the real-time authorisation required of the Sponsor under the scheme rules.

NPA presents a new means of approaching sponsorship, in turn presenting a potentially lucrative new customer proposition for those Participants with the appetite to offer sponsorship.

As a technology provider, Form3 operate in the fast paced and rapidly evolving Fintech industry. Fintechs regularly contact Form3 seeking direct connectivity for FPS which can be provided, however, discover limited choice regarding settlement sponsorship. NPA can dramatically open this market. DCNSP opportunities within NPA:

• Name changed to ‘Direct Non-Clearing Participant’ (DCNP)
• Flows no longer include online real time authorisation by Sponsor
• “Auths” are replaced by a Sponsor set limit on maximum net position.
• Removes risks of Sponsor nonavailability and resulting reversals
• Potentially opens Sponsorship model up to other Participants
• Sponsor still does not have line of sight of transaction flows and therefore may be unwilling to sponsor Participants with Payments Originated Overseas.
• Assumes willingness of Sponsor to set limit.
• Pay.UK may change roles and responsibilities in scheme rules and procedures but this is not expected to be material.

It cannot be underestimated the wide reaching impact that the NPA will have on all aspects of the payments workflow for banks. With a project of this size it can be seen that approaching it from a technical standpoint of a platform layer enables banks to separate these two areas of the project.

We cover this and much more in our 'Comprehensive Guide to New Payments Architecture'. Download your copy today or reach out to one of our experts to discuss how Form3 can support you NPA journey.