With NPV looming, UK banks must strengthen beyond mere compliance

The UK’s payments ecosystem is ready for an upgrade. While a blend of innovation and regulation has long benefitted the UK’s businesses and individuals alike, the current combination has reached its limit in usefulness. The market is hungry for a framework built on next-generation technology, designed to deliver more choice and increase competition.

Think about credit card payments –merchants and retailers typically receive only 92% to 94% of the purchase price when customers use credit cards. The rest is absorbed by card and processor fees. Given the frustration over these costs, person-to-person and business-to-business bank transfers present a major opportunity in the UK, made available through open banking. But only 17% of Britons are capitalising on the technology, with just 11.7 million active users.

The next bold move to modernise our payments ecosystem is the UK’s National Payments Vision (NPV), with open banking central to its overhaul. The government’s mission is simple – expand the economy, enhance security, and deliver more choice. And if successfully executed, NPV will set a new benchmark for customer-centric financial ecosystems, alongside local developments in DLT and digital currencies. The EU, for example, is only months away from finalising its ‘digital euro’ rulebook.

A report from the Financial Conduct Authority (FCA) found that 92% of the UK's financial services firms still rely on legacy technology. Specifically, 58% use legacy infrastructure for some operations, while 33% depend on it for most of their activities. But legacy infrastructure will not serve the UK’s efforts for global leadership in open banking, digital currency, cross-border transactions, security and fraud protection.

The second quarter of 2025 has kicked off. By its end, the Bank of England and Payment Systems Regulator will engage stakeholders and outline an approach for the UK’s payments infrastructure needs. Ahead of this conversation, there is an opportunity for banks to ready their infrastructure for NPV’s obligations.

Back to infrastructure basics

Though its obligations will set out specific, enforceable rules guiding regulatory activity, a swathe of non-mandated recommendations exist in the fine print. The NPV will provide a framework for participants to deliver the most competitive financial capabilities. But to actually move the needle, we see a requirement for financial institutions to get back to basics. Infrastructure basics.

ISO 20022 is expected to be the lingua franca of payments. Banks will not be able to compete without enabling it, but this requires more than just compliance in clearing and settlement systems, such as BACS, FPS, and CHAPS. It demands an ability to send and receive ISO 20022 financial messages end-to-end, without data loss.

Although most UK institutions have FPS down pat, there is a premium on being truly real-time, 24x7 with NPV. And this places pressure on all other payment modes to get with the programme.

Legacy technologies were never designed to accommodate modern, data-rich formats like ISO 20022. Time is of the essence for banks to address long-standing inefficiencies in those systems and introduce ISO 20022 interoperability.

NPV-native over NPV-compliant

It won’t be enough to just comply with the NPV. Banks will benefit more from the framework if their infrastructure choices make them NPV-native, rather than simply NPV-compliant. The former leaves legacy systems behind, fully embracing cloud technology and payments-as-a-service.

Rarely is this modernisation effort an isolated investment with the benefits of AI, crypto, and other emerging technologies most commonly delivered on cloud technology. But there is a practical route to modernisation. Full-scale system overhauls are costly and complex – they risk draining resources and disrupting business continuity. But just patching up legacy systems will impede NPV progress.

Striking a balance between the two is essential, and an incremental approach has emerged as a less risky and more advantageous strategy. This is when modernisation happens in phases – and it means that institutions can start their transition efficiently without compromising business continuity.

As deadlines near, UK banks will need to start moving on their modernisation initiatives if they’re to become NPV-native in an effective timeframe. Overlaying compliance onto legacy infrastructure will not suffice – it risks creating only a veneer of 'NPV compliance' around their current systems. And this has the potential to undermine the entire enterprise, including their open banking objectives.