UK Faster Payments
The UK faster payments system (FPS) was originally established in 2008 and indeed was the first such system in the world. Used for the processing of mobile, standing order, online bill and person to person payments, it is the key system for retail payments in the UK as well being used for certain business payments. Transactions are normally processed within seconds from originator to beneficiary and the system runs on a 24/7 basis. Settlement takes place three times a day with member positions being calculated on a net basis and obligations being settled between member settlement accounts at the Bank of England. Historically the members of the system were banks, but recently FPS has been opened up to payment and e-money institutions.
There are three different membership options:
Direct Settling Participant
A Direct Settling Participant has direct connectivity to the FPS infrastructure and must open a settlement account at the Bank of England in order to fund its payment obligations. Access to the settlement account infrastructure will also require the Direct Settling Participant to join the SWIFT financial messaging network. In addition to the settlement account the member must also post collateral to a separate account in order to cover its single largest daily net debit position in the system. The ability to receive payments on a 24/7 basis is mandatory.
Direct Non-Settling Participant
Which level of access do I require
When considering which level of scheme participation is most appropriate the following criteria should be considered:
The first two membership options will incur testing and transaction fees from Vocalink the FPS technology company, plus there will be costs for building and/or running the gateways, depending on the technology supplier chosen. Direct Settling Participants will also incur SWIFT fees for any payments over the Settlement Account. Indirect participants will simply incur fees from their chosen provider which are usually a combination of transaction, account maintenance and technical implementation fees driven by volume.
Joining the FPS scheme as a Direct Settling Participant is a lengthy process which can take anywhere between nine and twelve months and require the dedication of significant resource. If time to market is crucial using the services of a Direct Settling Participant may be a more attractive and simpler process.
In summary payment and Emoney institutions need to have a very clear vision of their payments journey in order to determine the appropriate level of membership. Budget, resources, technology stack and client demand all need to be factored when making this decision.
Here at AuthoriPay we have extensive knowledge of FPS and the work that clients will need to do in each of the access models and we will be delighted to offer our assistance.