# Could the NPA be the catalyst banks need to transform their payment networks? Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-04-26 Category: FINANCE Category URL: https://financedigest.com/category/finance Meta Title: The Future of UK Payments: NPA and Banking Evolution Meta Description: Discover how the New Payments Architecture is reshaping banking and payments systems in the UK, promising increased innovation and competition. URL: https://financedigest.com/could-the-npa-be-the-catalyst-banks-need-to-transform-their-payment-networkshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/fd311017-11-1736815830217-compressed.jpg) ![](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2da-38-450x535-1736815830117-compressed.jpg) _By_ **_Michael Mueller,_** _CEO,_ [_Form3_](https://www.form3.tech/) The payments landscape has undergone some significant changes in the last few years. For a start, we’re seeing fewer cash payments being made. As well as this, the sheer amount of payments that are being made is [growing — and growing fast](https://www.financedigest.com/determination-and-innovation-the-key-for-fast-growing-uc-firm.html "Determination and Innovation the Key for Fast Growing UC Firm"). All of this adds up to a [big headache for banks](https://www.financedigest.com/big-banks-can-be-challengers-too.html "Big banks can be challengers too"), who are increasingly finding that their own systems and processes are not fit for purpose. There’s a lot more going on behind the scenes in the [payments ecosystem than the ordinary person on the street may realise](https://www.financedigest.com/2021-predictions-realising-the-value-of-payments-transformation.html "2021 Predictions: Realising the Value of Payments Transformation"). Many banks utilise legacy IT systems for [payment processing](https://www.financedigest.com/are-your-payment-processes-in-cheque-for-the-new-legislation.html "ARE YOUR PAYMENT PROCESSES IN CHEQUE FOR THE NEW LEGISLATION?") while different standards and rules add to the complexity. Given how fast the [payments landscape](https://www.financedigest.com/5-predictions-for-payments-landscape-in-2022-and-our-reflections-on-2021.html "5 Predictions for Payments Landscape in 2022 and our reflections on 2021") is shifting, driven by consumer expectations and many other factors, the need to upgrade this infrastructure has never been more apparent. [Enter the New Payments](https://www.financedigest.com/enter-the-next-generation-of-payment-facilitators.html "Enter the next generation of payment facilitators ") Architecture, or NPA. The ultimate aim of this programme is to modernise and future-proof the UK’s retail payments infrastructure, bringing it firmly into the [21st Century](https://www.financedigest.com/taking-the-pain-out-of-payments-for-the-21st-century-worker.html "TAKING THE PAIN OUT OF PAYMENTS FOR THE 21ST CENTURY WORKER"). And as payments evolve, so [must the banks](https://www.financedigest.com/why-finance-professionals-must-bank-on-a-journey-to-the-cloud.html "Why finance professionals must bank on a journey to the cloud"). **The competition is heating up** The NPA promises to create a more robust, resilient, scalable and [secure payments](https://www.financedigest.com/allpay-signs-with-eckoh-to-secure-telephone-payments.html "allpay signs with Eckoh to secure telephone payments") ecosystem for the UK. It will also simplify access to payments infrastructure, with lower barriers to entry to encourage wider participation that will in [turn foster innovation and increase competition](https://www.financedigest.com/turning-big-data-compliance-into-a-competitive-advantage.html "TURNING ‘BIG DATA’ COMPLIANCE INTO A COMPETITIVE ADVANTAGE"). This should already be setting alarm [bells ringing for the bigger banks](https://www.financedigest.com/rambus-bell-id-simplifies-tokenization-management-for-banks.html "Rambus Bell ID Simplifies Tokenization Management for Banks"). While the NPA is a collaborative effort overseen by Pay.UK— with many [financial institutions contributing to the consultation and planning](https://www.financedigest.com/cfos-need-a-focus-on-forex-in-financial-planning-tools-accountagility-reveals.html "CFOs need a focus on forex in financial planning tools, Accountagility reveals") of the programme — it is also going to be a great leveller. This is why it is essential for [banks to be planning carefully for the new world order](https://www.financedigest.com/austrian-regulator-orders-system-relevant-banks-to-up-capital-buffers.html "Austrian regulator orders system-relevant banks to up capital buffers"). Technical innovations such as ISO 20022, the new messaging [standard for payments](https://www.financedigest.com/adyen-rejuvenates-in-store-payment-integration-with-an-api-pos-solution-powered-by-nexo-standards.html "Adyen rejuvenates in-store payment integration with an API POS solution powered by nexo standards"), will provide the foundation for the creation of consumer-friendly features and products that could give some players a competitive edge. Those institutions that fail to recognise the opportunities on [offer — or that are hampered by a lack of appropriate resources](https://www.financedigest.com/copper-miner-teck-resources-rejects-glencores-22-5-billion-offer.html "Copper miner Teck Resources rejects Glencore’s .5 billion offer") — could find themselves falling behind very quickly. **Getting ready for the NPA** From a participant’s point of view, virtually every process in the [payment flow is going to change in some way](https://www.financedigest.com/5-ways-banks-can-compete-in-payments.html "5 ways banks can compete in payments"). Some of the changes will be more subtle; others much more obvious. And when you consider the volume of [payments involved — billions every year](https://www.financedigest.com/2019-year-customers-take-control-payments.html "2019: The year customers take control of payments") — the size of the challenge becomes clear. Participating [banks are faced with the question of how they are supposed to take their existing payment](https://www.financedigest.com/crown-agents-bank-owner-explores-sale-of-british-payments-group-sources.html "Crown Agents Bank owner explores sale of British payments group –sources") flows and run them through the new architecture without making life completely impossible for themselves. **The** [need to modernise](https://www.financedigest.com/struggling-banks-need-to-modernise-and-improve-software-quality-management.html "Struggling Banks Need to Modernise and Improve Software Quality Management") One of the issues that the NPA has brought into sharp focus for a lot of participants is the outdated nature of their existing infrastructure. Some banks are still using systems built in the 20th Century, and upgrading complex and inflexible [processing platforms with dedicated payments](https://www.financedigest.com/emvco-streamlines-approval-process-for-mobile-payment-devices.html "EMVCo Streamlines Approval Process for Mobile Payment Devices") engines to the requirements of the NPA is a challenge. Those banks that still use [legacy systems](https://www.financedigest.com/retailers-weighed-down-by-their-own-legacy-systems-survey-reveals.html "Retailers Weighed Down by their own Legacy Systems, survey reveals") should take the NPA as a sign. If the payments infrastructure is being modernised and future-proofed, then [banks should be doing the same thing](https://www.financedigest.com/5-things-to-consider-when-choosing-a-challenger-bank.html "5 Things to Consider When Choosing a Challenger Bank") with their own infrastructure. There are a number of innovations that the NPA will bring — including richer data sets and end-to-end operability — that will enable [banks to develop services that really enhance the customer experience](https://www.financedigest.com/transforming-the-banking-experience-to-be-mobile-first-and-people-centric.html "Transforming the banking experience to be mobile-first and people-centric"). However, if they are still using [legacy systems](https://www.financedigest.com/it-is-time-insurers-act-smart-by-making-legacy-systems-a-thing-of-the-past.html "It is time insurers act smart, by making legacy systems a thing of the past") then their ability to do so will be compromised. But while participants should be taking the NPA as a [sign to get their own house](https://www.financedigest.com/discount-dining-clubs-tastecard-and-gourmet-society-grow-their-offering-as-chimichanga-and-spaghetti-house-both-sign-up.html "Discount dining clubs tastecard and Gourmet Society grow their offering as Chimichanga and Spaghetti House both sign up") in order, they shouldn’t fall into the trap of focusing too hard on the NPA itself. Instead, they should adopt a longer-term approach. As mentioned above, the [payments landscape moves quickly and very few of us would be able to accurately predict what it will look like in 10 years’](https://www.financedigest.com/2022-the-year-future-payment-trends-become-reality.html "2022 – the year ‘future payment trends’ become reality?") time. [Banks already have the bonnet open](https://www.financedigest.com/barclays-private-bank-opens-new-office-in-verbier-switzerland-for-2022-23-ski-season.html "Barclays Private Bank opens new office in Verbier, Switzerland for 2022/23 Ski Season"), and will be assessing what they need to do to adopt the NPA — the very least they should be doing is asking themselves how they will approach future challenges too. Transitioning to the NPA could be a [challenge for participant banks](https://www.financedigest.com/challenger-banks-missing-golden-opportunity-to-steal-business-from-competitors-by-repeating-same-old-mistakes.html "Challenger Banks Missing Golden Opportunity To Steal Business From Competitors By Repeating Same Old Mistakes"), but with the right approach there are also several opportunities here. While it is a costly and complex undertaking, the banks that best adapt to the NPA can also put themselves in a position to deal with any [future challenges that happen in the payments](https://www.financedigest.com/the-future-of-biometrics-in-payments.html "The Future of Biometrics in Payments") ecosystem. The key is to take a flexible, API-based approach that enables them to react to changes and develop new, customer-focused solutions as and when required. For many, there is a certain amount of pain that will have to be suffered to get to this point. But if they aren’t prepared to bite the bullet and overhaul their legacy infrastructure now, then they will find themselves with the same problems time and time again. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---