The Bank of England is working with HM Treasury, the Financial Conduct Authority and the Payment Systems Regulator, as well the wider industry, to deliver the National Payments Vision, which will modernise the way we pay for things every day.
But first…
What is a payment?
It is, simply, the movement of money from one person or organisation to another.
Whether you hand over cash, tap your card, or click 'send' on a banking app, the same thing happens: some value you hold is transferred to someone else – either directly by you, or by someone else on your behalf, eg your bank.
In short, a payment is a transfer of value, allowing people and businesses to settle what's owed in a safe, reliable way.
How is the Bank involved in payments?
It is our job to try and keep the economy stable. And a key part of that is making sure that you can transfer and receive money in ways that are, as previously stated, safe and reliable.
We are responsible for producing banknotes, which are a form of cash. We design and print them, and update them with the latest anti-forgery technology.
When it comes to digital payments, most of the technology that allows you to transfer money is run and managed by specialist firms. For example, Pay.UK operate the UK's Bacs Payment System, which is often used to make salary payments and direct debits. It also runs the UK's Faster Payments System, which is often used to make bank payments from one person to another. Financial companies, such as banks, then connect to those systems and use them to provide services to their customers.
Our role in this is to provide the behind-the-scenes 'settlement service', which transfers funds between these financial companies. This is known as the real-time gross settlement (RTGS) system. It is an electronic record of all the money sent and owed between banks and financial firms in our economy. It allows us to make sure everyone gets what they are owed and has enough to pay what they owe to others. We also run CHAPS, which is a service that people and firms can use to make payments, especially larger ones.
What are 'next generation' retail payments?
In this context, we are talking about a major upgrade of the UK’s core payments systems. We sometimes refer to this as 'next gen'.
Next gen is what we are doing to modernise the way we make payments in the UK, so our systems can continue to support how we do things today, but also allow for new ways of transferring money.
Our work is focused on improving the process of moving digital money (ie card payments and bank transfers) between people and businesses.
The systems that are in place work well, but the landscape is changing fast. So, the tools and technology we use will need to be able to adapt to things such as the evolving needs of users and new types of money.
What could change?
Mostly things behind the scenes.
The aim is to build new payments infrastructure, which service providers (eg banks) use, and which will be even more resilient and trustworthy.
To everyday users, things such as bank transfers or paying your bills will initially work the same way – you probably won't notice any difference. But over time, you will start to see the benefits.
We would like next gen payments to:
- allow you to do things such as pay directly from your account when shopping in-store or online
- move money more smoothly between different digital forms
- support faster and more efficient international payments
- give people and businesses better control over their payments
How will it affect me?
In the short term, not at all. You will not have to do anything. The changes are being done in the background, so it will not affect the way you pay for things day to day. You can keep using your card, phone, cash etc, as usual.
In the longer term, you will have more choice in how you pay for things. But there will be no sudden changes. The transition will be gradual and you will not be made to change the way you pay – there will just be more options available to you.
Is next gen another name for the digital pound?
No.
The digital pound – also known as a central bank digital currency (CBDC) – would be a new type of money. It would be an electronic version of our currency, issued by the Bank.
We are still only exploring this concept and have made no decision on whether to introduce it. The design phase is ongoing, with updates expected in 2026.
Next gen, on the other hand, refers to a major upgrade of the UK's core payments systems, which financial firms will use to transfer money. While they are different, our work on the digital pound has helped build our understanding of payments in the modern world. Next gen will, therefore, be designed to support today's payments and remain adaptable to future forms of money.
In simple terms, next gen is about modernising the payments system itself, while a digital pound would be a new form of digital money people could use. They're related in that both are about the future of money, but they are not the same thing.
Will this make it harder to commit financial crimes?
We hope so.
A big focus is improving how we protect payments from fraudsters and other criminals. For example, it may help the safety measures that are already in place work more effectively and make sure financial crime risks are considered as the system is designed. This could include:
- more consistent checks, monitoring and information-sharing across the system
- better security features built into new types of payments
- stronger ways to prevent, detect and respond to suspicious activity where action may need to happen across more than one payment service provider
Criminals will always try to come up with new schemes and workarounds. But next gen will be designed to give banks, payment firms and authorities a stronger overall system to work with – helping them spot risks earlier, respond more effectively and better protect your money.
