Impact of 24/7 Realtime Payment Systems – Victoria Cleland [Episode #9]

Podcast Intro (00:00:00) – Hello. Welcome to P.I.T. Exchange, a podcast by Currency Research. Join us as we discuss the latest in payments, innovation and technology with the industry’s most innovative thought leaders. Today’s payments are changing and moving around the world faster than ever before and P.I.T. Exchange gives you the knowledge and insights to keep up. Sit back and relax as we join Currency Research, exchanging ideas with today’s special guest.

Jens Seidl (00:00:33) – Welcome everybody to another episode of The P.I.T. Exchange, Payments, Innovation and Technology. I’m very glad to have a very special guest with us today. Victoria Cleland from the Bank of England. Welcome, Victoria. Before we jump into the business side of things, we thought we’d try something new. And you’re actually the first person that we’re going to try this with. Just ask three random questions about yourself, before we then talk a little bit about more the business side. So first question is on a plane, do you prefer window or aisle?

Victoria Cleland (00:01:12) – Definitely window.

Victoria Cleland (00:01:13) – I like seeing what’s going on around. And I think last time we met in Cape Town, the best view I had a table mountain was from the plane window.

Jens Seidl (00:01:22) – Okay, that’s a good reason. Yep. Tea or coffee?

Victoria Cleland (00:01:26) – Definitely tea. Earl Grey with milk.

Jens Seidl (00:01:29) – Love it. And what’s your favorite kind of holiday?

Victoria Cleland (00:01:35) – Activity, either walking or cycling, but with some good food and wine at the end of the day as a reward for the activity.

Jens Seidl (00:01:42) – That sounds perfect, especially the second half. All right, well, let’s jump in then. Victoria, I’ve known you for quite a few years now. When you were, the chief cashier of the Bank of England, I think is when we first met. Do you want to introduce yourself and talk a little bit about yourself and what you’ve been doing and are doing now for the Bank of England, please?

Victoria Cleland (00:02:02) – Yeah, certainly. So I’ve actually been at the Bank of England for all of my working life with a whole range of jobs, from looking at how small businesses with finance to a bit of supervision.

Victoria Cleland (00:02:13) – I was the graduate recruitment manager. And a number of times I’ve sort of had roles in payments. My most recent three roles were deputy head of the Special Resolution unit. So actually looking at how to resolve failing banks and building societies, something I started at the time of northern Rock. I then, as you say, became chief cashier. So everything to do with bank of England banknotes, including signing them. So that was really exciting. And I used to think that the numbers involved in banknotes were enormous. But now I’m lead the team responsible for running our real time gross settlement system. And with that, we’ve got over £700 billion a day, about a third of the UK’s GDP going across the system. So really responsible for running that system, running perhaps, or high value payment system. We’re also in the process of renewing our system. And also I’m responsible for the sort of payments policy work here in terms of what do we need to do in the UK wholesale payments to really deliver what industry wants.

Victoria Cleland (00:03:21) – How’s that changing? But also pushing forward on cross-border payments as well. So I’ve got a role on the FSB’s, cross-border payments delivery group really trying to push forward the G20 roadmap.

Jens Seidl (00:03:35) – That sounds like you’re definitely keeping busy. So I’m extra grateful for you making the time to speak to me today and share some of your, your experience with our, our listeners. Maybe you mentioned the GPS system already and that there’s been some work underway. And I think overall, there’s been quite a bit of, refurbishment, if you like, or if not, even new, completely new installations for systems throughout the payment landscape in the UK. Can you just talk a little bit about what the main upgrades have been in the recent past?

Victoria Cleland (00:04:10) – Yeah. I mean, the main sort of area that I’ve been focusing on has been around the wholesale and systems in the UK. The Bank of England runs our TGS and also operates Chaps, the high value payment system. Pay UK operates our sort of faster payments and Bacs direct debit system.

Victoria Cleland (00:04:29) – We’ve also got the cheque clearing system and then all the cards, paper UK’s in the process of their own sort of transformation work on the retail side, but I can perhaps do a bit more to bring to life what we’re doing on the wholesale, side, where I guess the, the big milestone first mention was back in 2017, when we actually brought chaps in-house to the Bank of England. It used to be operated separately, but we saw some real benefits in terms of particularly resilience, of having chaps in-house and able to benefit from sort of a lot of the cyber experience and things that the Bank of England can bring. and at the same time, we started working very closely with industry to say we want to upgrade our real time gross settlement system. What would be most useful for you in the industry? for us to do. We knew we wanted to upgrade it for resilience purposes. The current system was built in 1996. I often say to people think what sort of telephone you had in 1996, how that has changed.

Victoria Cleland (00:05:32) – So isn’t it important that we sort of upgrade this core piece of, national infrastructure? So resilience was at the heart of what we wanted to do, both in terms of cyber resilience but sort of operational resilience, business continuity at the same as well. But we were also thinking about how can we improve innovation and competition if we’re going to open up the system to change one thing, let’s actually do as much as we can. So we talked to industry in terms of what they wanted, but we were also very keen to think about what do we want now, but also what might we want in the future. so some of the changes are really enabling us if we decide to, for example, extend operating hours we’re building in now the capability to do that, even though we’re not going to switch on that, too quickly. We’re also building in the capacity for a lot more participants to help increase access. and also we’re trying to think about the future. So we’re building a solid platform in which we can have a lot more change and a modular architecture.

Victoria Cleland (00:06:45) – Easy, but it’s not. So we’ve decided not to do it as one big bang. the first major stage was last year when we introduced ISO 2002 two messaging for chaps. something that’s really important and I may mention ISO a few times on a conversation yens because it’s so important domestically, but also for cross-border payments, but also for actually the participants in the market, they can really benefit from straightforward processing what it tells them about their customers. So we introduced ISO for chaps last year. And then this year we’re going to be introducing the new core settlement engine to the RJs system which will have greater resilience, increased functionality. So introducing some API’s, enhanced liquidity saving mechanisms, enhanced availability, for the industry to interrogate at their own data, more capacity for more participants. So there’s a lot in what we’re delivering this year. but we’re also busy and planning the roadmap for the future as well, with some things like synchronization, extended hours and things which you may come onto later. But I think the most important thing is we’ve introduced ISO and we’re about to introduce the core settlement engine, but that is not the end of our ambition here at the Bank of England.

Jens Seidl (00:08:14) – Well maybe let’s stay on ISO for, for a moment. I was just meeting with Mark Gould from the Federal Reserve Bank last week, actually, and he’s going to be the next guest on our podcast. And we were talking about ISO, 2022 and the fact that it is widely, implemented now across a large number of, of geographies. But the next step really is what are we going to do with all of that data that is being enabled through ISO 20 or 22? Is there already or are there already initiatives underway in the UK or with the Bank of England, where you can see how this enriched data is actually changing the way we operate payments?

Victoria Cleland (00:08:58) – It’s beginning to change. I’d love to say that it has changed a lot already. I think what we’re really waiting to see internationally is more critical mass. So I think the first really big move was last year when the ECB moved to ISO. As you say, the small, the big countries just changed or along the way, I think once a few more countries are there, it will be easier for the main participants to really get the advantages of ISO and to use it, more with anger.

Victoria Cleland (00:09:30) – So actually, next year in the UK, we’re going to mandate the use of some of the enriched data for, payments between FIs. So what we, as the Bank of England doing is really trying to explain to industry the benefits for them. I often say this isn’t a mandatory regulatory thing just for the sake of it. It is important in terms of global harmonization. So it essentially enables systems to speak to each other. So it will really help us in the world of cross-border payments, but it also helps us domestically. When UK moves across to ISO, it would be easier to use chaps as a sort of substitute for FX if there were any problems, for example with FPS. So it helps there. But for the industry straight through processing benefits, I think really beginning to understand their customers more is important. There was last year, UK finance in over here ran an idea-a-thon which was really trying to crowdsource ideas in terms of how can you as businesses use ISO, there’s some fairly simple things that even sort of the hospitality industry are thinking actually, they can tie payments and invoices together and just save a bit of back office, keeping, but lots of really interesting work in terms of, anti-money laundering, understanding customers more what their needs are.

Victoria Cleland (00:10:56) – So I think this there are lots of ideas out there, but the payments world at the moment, there is so much change. It’s trying to encourage participants to think, okay, you put this in. Don’t just think, what is the next change you’ve got to implement. Let’s really, understand the importance of this. So we’re sort of running a few webinars and things to really try and get them to think about the benefits for them as participants, not just for us sort of more centrally.

Jens Seidl (00:11:22) – And I think that’s absolutely the right approach because people had to make this investment. Now they want to see some return on the investment. So they should be thinking about how can they actually use it to their benefit. Yeah. So I see that, let’s come back to RTGS. Maybe you were saying that the upgrades that you’ve done had no do not only mean there’s more resilience now with the system, but there’s also new capabilities that you can unlock. And you mentioned specifically synchronization, which for many people on this podcast, may not mean anything.

Jens Seidl (00:11:52) – So can you give us an intro to what that actually means and what it achieves?

Victoria Cleland (00:11:58) – Yes, certainly. And so when we talk about synchronization and some people call it atomic settlement, but again, that’s not the most user friendly, way into it. We’re really looking at how we can link a payment much more closely to an asset. So when we’re thinking about it from an art perspective, we’re thinking we could have the central bank money, the sort of least risky form of, money there is in the RTGS systems as now. But we could then use a synchronization operator to link our ledger to another ledger. It could be securities, it could be another RTGS, it could be FX. And we’ve also done some experiments which I’ll touch on, in a minute with, real estate. So property purchases. And it’s really trying to say you can tie the two together and the settlement will take place if and only if both legs are ready at the same time. And the work that we did looking at this in relation to real estate was jointly with the BIS Innovation Hub in London, something called Project Meridian, and that was actually showing that you can tie a ledger to a real estate ledger.

Victoria Cleland (00:13:19) – And with time you can also tie in. So in one overall payment you can not just buy the house, you can update the land registry, you can pay your solicitors. You can pay stamp duty all in one go. So that is something that we think could be really valuable in taking out quite a lot of the frictions of different, stages. But we think that if we do it through synchronization, it means that all of the other sort of assets can stay in their own houses, so to speak, and we can just focus on the on the money side of it. So that could be really exciting.

Jens Seidl (00:13:58) – That that is very exciting. And it’s I think it’s especially interesting because there’s so much discussion about programmable payments to digital currencies, wholesale CBDCs, enabling that kind of thing. And I guess what you’re saying is we can already enable this with existing technology, and we may not even need central bank digital currency. Is that right? Or is there still a difference between the two different, models and approaches?

Victoria Cleland (00:14:28) – I think what you said is spot on.

Victoria Cleland (00:14:30) – Other people may slightly disagree. There is still a real debate out there in terms of what exactly is a wholesale central bank issued digital currency? on one level, we already have them in terms of RTGS enable wholesale settlement, digitally in central bank money. So we on one level, we already do this. A lot of the time when people talk about wholesale CBDC, they’ll think about it being on a separate platform and usually with sort of some form of distributed ledger technology, and then maybe thinking, around tokenization. So what we’re doing at the moment is really trying to think, what are the benefits that a wholesale CBDC could deliver, and what are the benefits that we could deliver through enhancing our RTGS system with things such as synchronization? If we had it open for near 24 over seven, can you get the same benefits? So that’s the sort of the real debate that’s out there at the moment.

Jens Seidl (00:15:35) – Okay. And maybe also linked to that, there’s a lot of debate about tokenization of real life assets.

Jens Seidl (00:15:42) – It’s the new RTGS system, quite easy then to maybe interface with that world as well. Or is that where you then really would need a wholesale CBDC, or could the RTGS talk to, talk to inverted commas? Yeah, to those tokenized assets?

Victoria Cleland (00:15:59) – Yeah. I mean, our view is that we could develop a way for it to talk to them. So if you’ve got the synchronisation, operator between the two, it’s almost translating. I mean, at the time we started building our new RTGS, we made a decision not to build that on DLT, but we were very clear that we wanted it to have the capability to interface with other participants or players that were using DLT. And we did some proof of concepts a few years ago to make sure that was that was possible. And recently, we well, at 2021, actually, we introduced the concept of an omnibus account within our RTGS, which enables, players sort of, financial market infrastructures to have an account within, an omnibus account within which they can pool money from various other participants, and they can use DLT within that to move amongst those participants, for example, when RTGS is shut, or if they’ve got, a similar setup in another country, they could do sort of, cross-border in that way.

Victoria Cleland (00:17:08) – So although we’re not DLT, we’re sort of open to working with others who are.

Jens Seidl (00:17:15) – Very interesting. Okay. Well, you just mentioned cross-border. Maybe we should talk a little bit about that as well because again, there’s a lot of work underway to improve cross-border payments. The G20 have, really asked the industry to, to look for improvements, how to make cross-border payments, more frictionless, cheaper, quicker, more efficient. and I guess the new RTGS system has a role to play in that as well. Right, to what extent? And I know we talked about that previously to, to what extent do you think the extension of operating hours of the RTGS is also then key to make cross-border payments quicker, because there is always delays with time zones? If we look go around the world, even different working days. If you look at the Middle East, for instance. So to how important do you think that is to that initiative?

Victoria Cleland (00:18:09) – I think it’s a really important part of enhancing cross-border payments, but it’s not the only part.

Victoria Cleland (00:18:15) – And the work that the G20 did was really trying to, as you say, understand the frictions that are making them cross-border payments more expensive, slower, harder to access and less transparent. And in terms of trying to address those challenges, the G20 set out a series of building blocks and a roadmap, and also some very clear targets in terms of where we want to get to many by 2027. A couple of the remittance targets for 2030, but also some ideas of how to do that. And I think what the work showed was it wasn’t just a technology problem we need to solve. It’s not just a sort of data problem. It’s not just a regulatory problem. It’s a bit of everything. and so the building blocks and the subsequent priority actions were really trying to address a whole range of very different, things. Some of them then fall to central banks, such as operating hours. And I’ll come back to that in a second. Others are more of the private sector in terms of how can they be more transparent to their customers, in what they’re doing.

Victoria Cleland (00:19:24) – Some of them move around to finance ministries, some of particularly some and some of the data issues. So a lot of players need to make this happen. And some of the sort of things such as central bank, digital currencies, even retail ones, they could potentially help if they came in provided they had cross-border front of mind. But to my mind, operating hours is a key foundational one because it doesn’t matter what sort of configuration you’ve got. Is it interlinked? Is it CBDC or are you trying to use stablecoin? Having more systems open at the same time makes a real difference. And so one of the things that the CPMI did was to issue some guidance to central banks in terms of how to go about assessing the appropriateness of their operating hours. And so earlier this year in the UK, we had a consultation, with industry saying, would you like us to open near 24/7? What would the use cases be? If not, you know, 24/7 are the benefits of extending to for example.

Victoria Cleland (00:20:34) – Open much earlier in the morning, which is something the ECB has already done. And that sort of opens up quite a lot of the Asia Pacific markets, and so we’re sort of now digesting feedback from industry, but from a cross-border perspective, the real benefits, some institutions see real benefits in terms of liquidity as well, because of the systems, settle more, particularly at the weekends. It means they don’t have to hold as much over, particularly for card schemes, the potentially some risk benefits, because we’ve got FPX systems that are going 24/7, but only settling in central bank money ultimately when RTGS is open. So actually, if you’ve got to open more, you take away some of that risk. So I think there are lots of benefits from longer operating hours. But it’s a big change for industry. And they need to think, well, what does that mean for their own model. You need to start thinking, well, what do all of these sort of changes that we do out of hours mean? What is out of hours when you’re working 24/7.

Victoria Cleland (00:21:37) – So there’s a lot we need to think through. But I do see operating hours as one of the key enablers to help a lot of the other cross-border initiatives.

Jens Seidl (00:21:48) – Okay. No, it makes perfect sense, and beyond the operational considerations here and understand maintenance hours, etc., etc., there’s quite some complexity in that. But are there also other than the benefits, are there some new risks as well that we’re potentially introducing by going 24/7, or do you see mostly upside?

Victoria Cleland (00:22:10) – I think from a policy perspective I see a lot of upside. There are challenges in terms of running anything 24/7. It would be a different way of doing things in terms of do you need different shift patterns? What does it mean for staff? There’s some debates about how is it still is easy to resolve a financial institution over a weekend if the money can still be flowing around, but absolutely none of these are insurmountable. A number of countries have already moved to 24/7. And there’s also a question well, what does being open 24/7 mean? Does it mean that settlement is taking place every second of the day, or does it just mean that there are many more opportunities to input payments so that when settlement opens up, you sort of got a lot more ready to go through? So there are different ways of interpreting quite what 24/7 means.

Victoria Cleland (00:23:05) – And some of them will depend on individual markets and customs and things.

Jens Seidl (00:23:10) – Yeah. Well that’s a very good point. And I guess it’s linked to another discussion which you know, we got the payments week coming up in Kuala Lumpur. And one of the things that features heavily on the agenda is the debate about how, how far should we take faster payments, should everything become an instant payment sometime in the future? Because if that is the case, then you would have an expectation that RTGS would also settle instantaneously. So I think there’s a whole range of potential knock on effects with that. And I think one needs to, again, synchronize with the other. Right. You can’t do one without the other.

Victoria Cleland (00:23:47) – Yeah. And I think it also I mean, one of the sort of debates in the UK about instant payments is if things become too quick, do you have time to sort of spot fraud and things like that. So it’s a balancing act. Some people want things to be quicker. Some people would rather they were cheaper.

Victoria Cleland (00:24:04) – So there are sort of trade offs and I think one of the things that we see globally is people like choice. It isn’t going to be a necessarily one size fits all. So I think we need to be thinking about what can we do to lay the foundations for all of these different sort of front ends and things as well.

Jens Seidl (00:24:22) – Okay. So we talked about the 24/7 operations, making cross-border payments quicker, and more efficient. What other promising developments do you actually see? And I know you were heavily and are heavily involved with the CPMI, initiatives. So what are the big promising headlines here that we’re looking at.

Victoria Cleland (00:24:43) – So I think we’re seeing some good progress in terms of access. I think more countries now are looking at sort of access. The UK was, the first G7 central bank to enable non-bank payment service providers, access to RTGS. So we’re seeing a lot of other countries are now looking into that. You’ve mentioned interlinking. And so there’s quite a lot of work looking at interlinking of FPXs from a CPMI perspective.

Victoria Cleland (00:25:10) – We’re developing some guidance in terms of governance and oversight. But I know on a more practical level lots of systems are talking to each other. We’re also seeing some more sort of views about a multilateral platform. So rather than just linking to RTGS together, can you have one platform that has different currencies? And so there’s some exciting work going on there. We’re seeing what boom is doing and so I think there’s a lot of activity trying to think around that space. There is some progress on some of the data, side of it, particularly ISO, which we’ve touched on. But ISO is another really important enabler for cross-border payments the more we can harmonize it. So ISO sets out the sort of the basics of the information that you should have, but making sure everyone inputs in the same order, and also trying to get more of a push from rich data is important. There’s an interesting group looking at API, so can we have greater standardization of APIs? Again, if you’re doing something domestically, think about, what’s going on going forward.

Victoria Cleland (00:26:22) – There’s some interesting work from. FATF in terms of particularly wire transfers and how that can be improved. We’ve put out work in terms of enhancing SLAs to really understand about transparency. So there are a lot of activities across different areas, and some of these are being coordinated for some new groups that were set up last year, for example. Now I always remember the acronym before I remember the full name. So I remember the acronym. It’s called PIE, which is the Payments System Interoperability and Extension work group, and that is trying to bring together the private sector to understand what they think would make a real difference in this space, and some of the things that those the private sector can do, but other times they’re saying, actually, this is what we think the public sector, should be doing. And we’re also and there’s another group, the legal, regulatory and supervisory group trying to understand is there an opportunity for even if not sort of pure harmonisation, but greater consistency within regulations? So there’s a lot going on at the moment.

Victoria Cleland (00:27:34) – There was a progress report issued in October last year, and that was looking at the targets that was set for 2027 and how close we were. and there’s still a lot of work to do, I’m afraid. But it was helpful in terms of understanding which of those targets around, for example, speed and things more work was needed on. But also what was really striking was the difference between different payment corridors or different areas. and I think what’s really important now is that jurisdictions think about, well, where are they on this journey and what are the things that individual, jurisdictions need to do because it isn’t a complete one size fits all. and the IMF and world Bank are making technical assistance available as well to help some of those countries really understand what they need, what they need to do. And we’ve got something called a community of practice for central banks as well to share ideas. So there’s a lot of activity out there. Some of this change takes longer than one would ever hope. It’s not that easy to just move to 24/7.

Victoria Cleland (00:28:46) – There’s quite a bit of investment needed, but we’re seeing real signs that people are beginning to change.

Jens Seidl (00:28:52) – Okay. Yeah. And I was I was waiting for the, the regulatory and legal, aspect of things because I can’t remember the name of that project. Now, the BIS was running one of the cross-border initiatives in Asia. I think it was a CBDC one. It I think it was the CBDC one where they observed that the technology is all there and it’s easy to actually make the technology work, but it’s really the legal framework and the regulatory framework that’s so different between each jurisdiction. And that’s going to take the longest actually to resolve, and enabling those, those cross-border payments. Is that a general rule that each jurisdiction or many jurisdictions anyway, have such different rules that normalizing these rules or as you said, getting at least a bit closer together and and moving towards each other is probably one of the hardest thing to resolve.

Victoria Cleland (00:29:43) – Yeah. And I think it’s, it’s it is hard and it’s really important because different countries will have different reasons for why they do things.

Victoria Cleland (00:29:49) – A simple example is, just in terms of identity documents. Some countries must be a passport, others are quite happy with the driving licence, others it can just be an ID card. And if you think of a cross-border transaction, it has to technically go through a number of different countries. I mean, my team did some work a while ago, sort of stylized fact, but a payment going through a correspondent banking model from London to Vietnam could go through 16 different stages. Now, if each country wants a slightly different, Has a slightly different data requirement. Some countries have capital controls, so understanding how all that fits together different data privacy laws is really is it’s quite tricky, and then another aspect of the regulatory side is are we treating payments in the same way of their stablecoins or something else. So is it a level playing field. So there are lots of different facets of that regulatory piece which. I think the more that we can do to give a clear understanding and slightly greater consistency would be really important.

Jens Seidl (00:31:07) – Good, good. And I hope with that mandate of the G20 countries, that hopefully we’ll get some more movement in that direction because I think the, the world has realised this is a very costly problem that we’re trying to resolve. It is holding economies back. It’s holding a lot of people on the lower end of the income spectrum back, because they have to pay a lot of fees to make cross-border payments. So I think it’s got the attention now, which is really good.

Victoria Cleland (00:31:34) – Yeah. No, it’s an important area. And I think you’re right. It isn’t just a sort of problem for the wholesale. Part is it’s actually wholesale retail and remittances. And yeah, the remittances show that actually the least well-off people are having to pay the highest percentage of fees and things and wait the longest for their money. So it isn’t it isn’t easy to solve. But I think the prize of solving it is really significant.

Jens Seidl (00:32:02) – Absolutely agreeD. So I think we’re actually running out of time here, so before we wrap this up, maybe just a short view from your point of view.

Jens Seidl (00:32:13) – What’s the the future of payments like? Are we looking at a bright future?

Victoria Cleland (00:32:17) – It’s definitely a bright future. It’s going to be a hard work future, I think. I mean, what we’re seeing at the moment is how much potential there is for payments to really help people’s lives. It can take a lot of the frictions out. So there’s a lot that we need to do. There’s a lot of technology out there to help us do it. So I think understanding what are the most important use cases and sort of doubling down efforts on those to really make a difference. So it’s exciting. But yeah, busy.

Jens Seidl (00:32:47) – Great. Excellent. Well, thank you very much for being with us today. Really appreciate your time, appreciate you sharing your views with us. And, well, I hopefully see you soon in person again. And, all the best to you and to all of your undertakings.

Victoria Cleland (00:33:02) – Thank you. And thanks ever so much for inviting me to speak.

Jens Seidl (00:33:06) – Thank you very much.

Podcast Outro (00:33:09) – Thank you for listening to The P.I.T. Exchange, a podcast by Currency Research. Check out our upcoming events and publications at currencyresearch.com and join us for our next episode to hear what’s trending in payments, innovation and technology.

Welcome to our latest podcast episode, where we delve into the fascinating world of payments innovation and technology. Jens Seidl, CEO/President at Currency Research, hosts this episode of the “P.I.T. Exchange” podcast by Currency Research and had the privilege of interviewing Victoria Cleland from the Bank of England. The conversation was rich with insights into the evolving payment landscape, and we’re excited to share the key takeaways with you, our fellow podcasters interested in technology and finance.

The Payment Landscape: Upgrades and Innovations

Victoria introduced herself and her extensive experience at the Bank of England, including her role as the chief cashier and her current responsibilities overseeing the Real-Time Gross Settlement (RTGS) system and payments policy work. She highlighted the significant upgrades and refurbishments in the UK’s payment landscape, particularly focusing on the wholesale payment systems and the introduction of ISO 20022 messaging for CHAPS.

The Benefits of ISO 20022 Messaging

We discussed the benefits of ISO 20022 messaging, such as the potential for enriched data to transform payment operations. Victoria stressed the importance of the industry understanding these benefits, which include streamlining processes and enhancing customer insights. She also touched on the upcoming mandate for the use of enriched data for payments in the UK.

RTGS System Upgrades

Our conversation then shifted to the RTGS system’s upgrades, which include a new core settlement engine, enhanced liquidity saving mechanisms, and the capacity for more participants. Victoria explained the concept of synchronization in payments, which links payments more closely to assets, potentially streamlining processes, especially in real estate transactions.

The Future of Cross-Border Payments

We explored the topic of wholesale central bank digital currencies (CBDCs) and their potential benefits. Victoria discussed the interoperability of the RTGS system with tokenized assets and distributed ledger technology (DLT), as well as the system’s role in improving cross-border payments. She mentioned the potential benefits of extending operating hours to facilitate global transactions.

Risks and Challenges of 24/7 Operations

We concluded our discussion by considering the potential risks and challenges of operating the RTGS system 24/7. The broader debate about the future of faster payments and the balance between speed and security in payment transactions was also a focal point.

Promising Developments and Regulatory Challenges

Victoria shared her insights on promising developments, such as more countries allowing non-bank payment service providers access to their RTGS systems. She mentioned the exciting work on a multilateral platform that could handle different currencies and the progress on the data side, particularly with ISO standardization.

Addressing the regulatory and legal aspects, Victoria acknowledged the challenges posed by different jurisdictions having diverse rules. She emphasized the importance of greater consistency and understanding in regulatory frameworks to facilitate cross-border transactions.

The G20 Mandate and the Cost of Cross-Border Payments

We discussed the G20 countries’ mandate and its potential to drive progress in this area. Victoria pointed out that the high cost of cross-border payments disproportionately affects the least well-off, making it a pressing issue to resolve.

Envisioning the Future of Payments

As we wrapped up our podcast, Victoria expressed optimism about the future of payments, highlighting the potential to remove frictions and improve lives. She emphasized the importance of focusing on the most important use cases and leveraging technology to make a difference.

Our conversation with Victoria Cleland provided us with a comprehensive understanding of the challenges and opportunities in payments innovation and technology. As we continue to witness the rapid evolution of the payment landscape, it’s clear that the journey ahead is both exciting and demanding.

Thank you for joining us on this exploration of the future of payments. We hope you found these insights as enlightening as we did. Stay tuned for more episodes of the P.I.T. Exchange, where we’ll continue to bring you the latest trends in payments innovation and technology.

You may want to continue the conversation about payments innovation by participating in the CR Payments Week in Kuala Lumpur in June. Find more here.

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Disclaimer: While we embrace open dialogue and value diverse perspectives, it’s important to note that the views expressed by individuals in our podcast episodes are entirely their own. They may not necessarily align with the views, opinions, or positions of the organization they are associated with.