NPV on legacy systems: a combination for cross-border and open banking setback

By Nadish Lad, Global Head of Product and Strategic Business, Volante Technologies

The UK has long maintained an effective balance of innovation and regulation, enabling financial institutions to prosper on the world’s stage. But the current combination has reached its limit of usefulness, and the UK’s payments system is due for an upgrade. 

As such, current domestic payment options are serving organisations and individuals in a timely, efficient manner. But international payment users – particularly businesses trading with the EU and beyond – still face high fees, long settlement times, and a lack of transparency. This is especially relevant post-Brexit, as UK companies confront additional complexities sending and receiving cross-border payments. 

Unlike domestic payments, international transfers often rely on outdated systems with multiple intermediaries, each adding costs and delays. But advances in open banking promise to solve this challenge, alongside other long-standing inefficiencies in the ecosystem. Open banking, however, is still relatively immature in its UK-wide adoption – with over 10 million users as of mid-2024, it still represents less than a fifth of the population.

The market is hungry for a framework built on next-generation technology, designed to deliver more choice and increase competition. Last year, the UK government introduced the National Payments Vision (NPV), outlining a plan to improve payments infrastructure, including making transactions faster, cheaper, and more accessible while strengthening open banking efforts.

​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. 

At the end of the current quarter, the Bank of England and Payment Systems Regulator are due to engage stakeholders and outline an approach for the UK’s payments infrastructure needs. Ahead of these conversations, there is an opportunity for banks to ready their infrastructure for NPV’s obligations.

Establish ISO 20022 native-tongue 

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 provides a framework for participants to deliver the most competitive financial capabilities but in order 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, 24×7 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.

A practical path to NPV-native

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 where modernisation happens in phases – institutions can start to transition efficiently without compromising their business continuity.

To advance capabilities in open banking and solve a myriad of payment inefficiencies, including EU cross-border transactions, UK banks must accelerate their modernisation efforts to become truly NPV-native. As deadlines approach, relying on outdated infrastructure risks creating only a superficial layer of compliance rather than a robust, future-proof foundation. Without genuine transformation, banks may not only fall short of NPV requirements but also hinder their broader innovation goals. 

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