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Guest blog: Bank of England's Real-Time Gross Settlement service

Central banks and payment systems are embracing the new global standard for financial messaging – ISO 20022. By 2025, ISO 20022 will be the de facto world­wide standard for high-value payments systems.

Guest blog by Becca Jelley, Communications Business Partner; Bank of England in conversation with James Southgate, Bank of England Senior Manager ISO 20022 Implementation.

What is the Real-Time Gross Settlement service?

  • The Bank of England’s real-time gross settlement service (RTGS) holds balances in accounts for banks, building societies and other institutions. These balances can be used to move money in real time between account holders to deliver final and risk-free settlement, whether for individual CHAPS payments, the CREST securities settlement system or retail payment clearings like Faster Payments.

What is the vision for the new service?

  • Our vision is to develop an RTGS service which is fit for the future, increasing resilience and access, and offering wider interoperability, improved user functionality and strengthened end-to-end risk management.
  • The renewed RTGS service will not only replicate the functionality provided today, but also deliver a range of new features and capabilities for payments and settlements between financial institutions.

What is your role within the RTGS Renewal Programme?

  • I am responsible for the introduction of ISO 20022 messaging in RTGS and the CHAPS payment system, which will replace the current SWIFT MT messaging. This includes liaising with SWIFT and other payment systems also moving to ISO 20022, including Pay.UK for its New Payments Architecture.

What is ISO 20022 messaging?

  • ISO 20022 messaging creates a common language for payments data across the globe, which allows enhanced data to be carried, in a more structured and enriched format than the current SWIFT MT standard. When SWIFT retires MT messaging for its cross-border payments service in November 2025, ISO 20022 will become the new global standard.

What are the benefits of ISO 20022?

  • Better data in payments promises to deliver significant long-term benefits for the economy. Structured addresses mean performing anti-money laundering and sanctions checks is easier and more accurate (in particular, reducing the number of ‘false positive’ alerts that arise from the current unstructured data). It will also be quicker for firms to identify and reconcile payments from their customers – for instance by using the invoice reference field.
  • When Pay.UK introduce the New Payments Architecture, it will also mean that for the first time in the UK, both retail and wholesale payments systems will work to the same message format. This will provide greater harmonisation, enhanced resilience (as payments can be sent via either CHAPS or NPA, without reformatting), less manual intervention and better analytics.

What should institutions be doing to prepare for the RTGS / CHAPS transition to ISO 20022 in April 2023?

  • We will migrate RTGS and CHAPS to ISO 20022 in April 2023, and are already engaged in a programme of testing with the CHAPS direct participants to prepare for this.
  • Banks, Building Societies and any organisation that processes large value payments indirectly through CHAPS should be speaking to their correspondent banks to understand how the messaging channels will change. If you use SWIFT to send payments, they are likely to continue support for MT/FIN for a limited period, but you will need to prepare for switching to MX/FINplus. If you use their online banking channels, the input screens are likely to change and may require more information. If you receive statements, you might start to receive more information with payments – starting with cross-border payments in November 2022, then CHAPS payments in April 2023.
  • Importantly from summer 2024, CHAPS will start to mandate the use of Purpose Codes for housing transactions and LEIs for payments between financial institutions. From November 2025, CHAPS will mandate the use of structured names and addresses. So the message is to get ready now!
  • If you hold a reserves account in RTGS, your account will switch to the new RTGS core settlement engine in spring 2024. The account number will remain the same, but the user interface will be replaced with a more modern and user-friendly system. We will also start to support services via APIs – starting with balance enquiries, and expanding further beyond 2024.
  • Reserves account holders should expect to see more information from the Bank, including details of familiarisation and training sessions during 2023, later this year.

For more information:

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The views, opinions and positions expressed within guest blogs are those of the authors and do not necessarily represent those of the BSA.

Posted by Becca Jelley on 06 June 2022