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RTGS: While CBDC May Emerge, Payment Infrastructure Improvements Near

RTGS: While CBDC May Emerge, Payment Infrastructure Improvements Near

Victoria Cleland, Executive Director for Banking, Payments and Innovation at the Bank of England, addressed the Real Time Gross Settlement (RTGS) system and the Bank’s vision for the future of payments. Noting that a Central Bank Digital Currency (CBDC) may emerge at some point in the future, Cleland said that the significant improvement to the payments system is nearly here.

In 12 months’ time, RTGS is expected to become a reality replacing a 25-year-old system.

“RTGS sits at the heart of UK payments. It is the infrastructure where the key UK payment systems ultimately settle – CHAPS and a myriad of retail systems including Bacs, Faster Payments, cheques and cards. The RTGS service settles an average of £700bn each working day (which is equivalent to more than the UK’s GDP every three days). This settlement occurs in central bank money, the ultimate risk-free asset. In addition to its settlement functionality, RTGS also plays an important role in the implementation of monetary policy. And the smooth operation of RTGS makes a vital contribution to the Bank’s overarching mission of maintaining monetary and financial stability,” said Cleland.

In June of 2022, the Bank is scheduled to migrate to a new system that is said to include long term benefits for the UK’s payments ecosystem.

“It provides flexibility to adapt to changes in the economy, emerging technologies and innovation. It provides international harmonisation, supporting cross-border payments. It can help compliance and regulation, providing richer data that will make it easier for businesses to detect fraud and help target financial crime. It will improve resilience as it allows re-routing of messages which could reduce the impact of outages on users. It provides enriched data that will improve analytics, reconciliations and promote competition and innovation. It allows straight-through processing with less need for manual intervention.”

Cleland said that “future-proofing” means continuous improvements and RTGS is a modular, flexible platform. During the past few years, a growing number of Fintechs, as well as Big Tech, are playing a role in the transfer of value and new forms of money can “contribute to faster, cheaper, and more efficient payments and have financial inclusion as a prominent design consideration.”

The speech in its entirety is available here. A consultation on RTGS is ongoing.

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