The Real-Time Gross Settlement (RTGS) service sits at the heart of all UK payments. RTGS is currently being renewed, with industry and for industry, to respond to the changing payments landscape. From June 2024, the renewed RTGS service will deliver a more resilient, flexible and innovative sterling settlement system to support monetary and financial stability. It will deliver benefits for industry across four key areas: increased resilience, greater access, wider interoperability and improved user functionality.
Strengthened resilience of RTGS to ensure prompt and secure settlement in a world of evolving threats.
The new settlement engine will be more flexible and resilient through:
Facilitating direct access to central bank money settlement for a wider range of participants. This will help to reduce tiering risks and promote competition and innovation.
To further build on providing access to RTGS settlement accounts to non-bank payment service providers (2017) and omnibus accounts (2021), the renewed RTGS will:
Enhanced cross-border payments and resilience by increasing harmonisation and interoperability between critical domestic and international payment systems.
Implementing ISO 20022 messaging standard will increase transparency, interoperability and provide richer data. It will enable:
More detail on the benefits of ISO 20022 messaging standard is included in this Annex.
Improved user functionality
Support emerging user needs in a changing payment environment.
Modular design of the core settlement engine will support an increased cadence of change. It will enable future changes to be more efficient, less resource intensive and quicker.
Enhancements to the CHAPS Liquidity Saving Mechanism will support lower liquidity costs.
RTGS will be technically capable of extending operating hours to near 24x7. We are working with industry to assess the case of enacting it (eg enhanced cross-border payments).
More modern and functionality-rich systems will make users’ interactions with RTGS easier:
Roadmap for RTGS beyond 2024
The new core settlement engine will also provide a strong foundation on which to build further functionality. Beyond 2024, we will benefit from this flexibility to continuously evolve the service to make sure it meets the changing needs of the industry, in responding to immediate issues and in making strategic enhancements. The Bank is working closely with industry to assess business cases before deciding which features to implement beyond 2024 and in what order. Progressing the priority features would help achieve the benefits set out below.
Ever higher degrees of resilience
Continuing to meet the highest standards of resilience to address evolving threats and new services.
New ways of accessing RTGS (via another network or APIs) would strengthen resilience and reduce reliance on third parties for settlement.
More choice for connectivity would make direct access in CHAPS more economical.
Improved connectivity and other enhancements would improve the usability of our contingency for settlement.
Facilitating innovation and competition
Supporting industry’s innovation which would lead to cheaper, safer and faster domestic and cross-border payments.
A synchronised settlement interface would allow RTGS to interoperate with other ledgers (eg overseas RTGS and other assets such as land registers) and technologies. It would reduce settlement risk and liquidity costs for a wide range of markets.
Extending RTGS operating hours would improve efficiencies for domestic and cross-border payments. It would create opportunities for quicker payments and better customer experiences.
Non-payment APIs would improve transparency, risk management and analytics, and reduce participants’ costs due to more automation.
The global ISO 20022 payment messaging standard enables richer, more structured enhanced data. This enables benefits throughout the payments chain: from market institutions, to intermediaries, to payment system operators and finally on to end users, the key clients of the payments industry.
Figure 1: The benefits ISO 20022 could deliver for payments
- Improvement in Straight Through Processing (STP)
- Structured addresses reduce processing time and transaction costs and enable more efficient screening in sanctions and anti-money laundering processes, mitigating financial crime.
- The global migration to ISO 20022 is improving harmonisation and interoperability, improving STP, contingency arrangements and choice of payment paths for customers. ISO 20022 is a priority of the G20 work to improve cross-border payments.
- Accurate view of cash processes – unique references track a payment throughout its journey, enabling improvements in cash forecasting, liquidity management, and payment profiles.
- Identification of critical payments – purpose codes can be used to identify critical and priority payments: from housing transactions to vulnerable customers.
- Automated, more deeply informed remittance processes – richer structured remittance data enable improved automation of invoice reconciliations, exceptions handling, and remittance information.
- Fraud – Legal Entity Identifiers (LEIs) and cross-validation with other ISO 20022 fields can more accurately identify potentially fraudulent payments. As a global identifier, the LEI is beneficial as a further verification in cross-border payments. Purpose codes may also help flag payment types that are at a higher risk of authorised push payment fraud, such as building maintenance.
- Compliance and regulation – pass through of richer information allows the inclusion of country-specific information in a standardised format without the need for proprietary processes.
- Enabling innovation – richer contextual and market intelligence data (eg purpose codes), a global identifier, and the analysis and application of structured remittance data all provide opportunities for innovating and creating better financial products and services for users.