The Bank of England has sketched plans for a revamped real-time gross settlement (RTGS) system, launching a consultation on September 16.
The central bank plans to undertake a "comprehensive rebuild" of the underlying technology, in the process retaining core functions and resilience, but designing a system it hopes will have the flexibility to keep up with the fast-moving payments market.
Broader access, higher resilience, improved interoperability with other systems and a wider range of functions available to users are the main goals.
The BoE has spent the year in talks with industry groups, which stressed the primary goal of the rebuild must be to maintain resilience. Many of the core functions are still fit for purpose, stakeholders say, but the system is nearly 20 years old, and an outage in October 2014 highlighted the need for a rethink.
On an average day, the system processes funds worth a third of the UK's annual GDP, with the high-value payment system Chaps and securities settlement system Crest accounting for the vast majority of the roughly £500 billion ($655 billion) daily value.
Breakdowns are clearly costly, and the BoE plans to retain its current system of having three settlement platforms at different sites, one of them a completely different design, in case of problems.
It also plans to further strengthen the system by basing it specifically on a "resilience framework" that stresses the "primacy" of data integrity, and by adding a new messaging channel.
The new system will offer direct access to a wider range of payments providers, and will be designed to be interoperable with new forms of payment infrastructure, such as distributed ledgers. ISO 20022 messaging will add further possibilities for connecting to other payment systems worldwide.
Over the years, the BoE has added new functions to the RTGS system, such as the introduction of "prefunding" in central bank money, and the creation of a liquidity saving mechanism, which uses algorithms to match offsetting payments, reducing intraday liquidity needs by around 20%.
The central bank plans to retain these features, while potential new functionality includes "near or true" 24-7 operations, access to richer payments and liquidity data, a tool for tracking RTGS payments, forward-dated payment submissions, and greater clarity on the liquidity saving mechanism's "queue".
The BoE will claim back the cost of the rebuild by temporarily raising fees for the system's users. It plans to reach final decisions on the shape of the system, notably areas such as the approach to cyber security, after the consultation closes in November, with a timetable to be agreed next year, and final delivery tentatively set for 2020.
Andrew Hauser, the BoE's executive director for banking, payments and financial resilience, says: "Taken together with prospective reforms to retail payments underway in the industry, these changes are designed to keep the UK payments infrastructure at the leading edge globally, whilst underscoring our commitment to maintaining stability and confidence."
This article originally appeared on Risk.net's sister website, CentralBanking.com.