On 25 January 2024, the Bank of England (BoE) published a speech delivered by Victoria Cleland, Executive Director for Payments at the BoE, at the Payments Regulation and Innovation Summit.

In her speech, Ms Cleland discusses how the BoE is enhancing its core payments infrastructure and policies in the light of the opportunities arising from innovation and new technologies in the payment landscape.

The speech outlines how the BoE is supporting such developments, which include not just technological change, but also changes in user behaviour and preferences and the nature of transactions.

In his July 2023 Mansion House speech, BoE Governor Andrew Bailey described the work the BoE is undertaking to explore innovation in retail and wholesale payments whilst maintaining confidence in the value of money and the settlement of payments. Following from this, Ms Cleland’s speech focuses on wholesale settlement in central bank money and the enhancements underway, including the improvements the BoE intends to make to the Real Time Gross Settlement (RTGS) service.   

Ms Cleland explains that the BoE’s vision is for RTGS to act as an open platform for change and innovation which supports the BoE’s financial stability and monetary policy objectives. To achieve the aim of developing innovative features which would lead to cheaper, safer and faster domestic and cross border payments, Ms Cleland outlines how the RTGS infrastructure is being enhanced to catalyse industry innovation in a number of key areas:

  • Increased transparency to empower firms and users in making better informed economic decisions.
  • Greater automation to speed up payments and cut costs by minimising manual intervention and introducing new services leveraging payment programmability, which could help to save liquidity and reduce settlement risk.
  • Exploring how wider access to the RTGS platform and longer operating hours, as well as boosting resilience, can help foster innovation.

She describes the BoE’s efforts to achieve this through:

  • Implementing the ISO 20022 global messaging standard, which was the first phase of the RTGS renewal programme and was completed in June 2023.
  • The upcoming transition to a new core settlement engine, which is expected to offer immediate benefits for the industry such as increased resilience and capacity, the ability to accept CHAPS payments up to 10 days in advance and enhanced liquidity-saving mechanisms.
  • Mandating purpose codes and Legal Entity Identifiers in specific CHAPS payments beginning from November 2024, and structured addresses and remittance data from November 2025.

The BoE is also reviewing the case for extended RTGS operating hours, as they could potentially enhance domestic payments and reduce risk in the financial system. They could also improve cross-border payments, which is a key focus of the G20.

Ms Cleland notes that the BoE is also developing further initiatives to foster wholesale settlement innovation through synchronisation, which would enable it to expand access to central bank money settlement further by coordinating settlement in RTGS with the transfer of one or more other assets on another ledger.