On 3 December 2024, the Payment Systems Regulator (PSR) published a consultation paper, CP24/13, on proposed changes to Specific Direction 3 (SD3). SD3 sets the legal requirements for Pay.UK in procuring upgraded infrastructure for payments currently made over Faster Payments (FPS).
Background
SD3 requires Pay.UK to migrate all FPS transactions to competitively procured infrastructure by 1 July 2026. However, the PSR explains that, due to changed circumstances surrounding the New Payments Architecture (NPA) programme, Pay.UK is no longer able to meet that deadline. Those changed circumstances are expected to result in the current FPS central infrastructure remaining operational for significantly longer than previously expected.
The proposed changes
The PSR is proposing changes to SD3 to reflect these changed circumstances. It notes that in doing so, it has had in mind the importance of the continued operation and resilience of FPS , the appropriate regulatory oversight, and progress towards its intended outcomes for infrastructure (which are better access; greater innovation; increased adaptability; reduced financial crime; and improved competition, including alternatives to cards such as account-to-account retail payments).
The proposed changes to SD3 include:
- Removing the current SD3 deadline and replacing it with the ability for the PSR to set a new deadline (which will not be before 1 July 2036).
- Strengthening oversight, including through a proposed ‘non-objection’ point before Pay.UK agrees to any new, or extended, contract for infrastructure services.
- Enhancing the PSR’s Regulatory Framework to address risks to competition and innovation. The PSR plans to publish a more detailed timetable for its consultation on the updated Regulatory Framework along with its decision on SD3.
Next steps
The deadline for responses to CP24/13 is 5pm on 21 January 2025. The PSR intends to give its decision on SD3 in Spring 2025.