CHAPS forecasts resilient volume growth

The long-term volume growth forecasts for CHAPS demonstrate resilient demand for the UK’s same day high-value payment method despite wider medium-term economic uncertainty, according to a new report published today (11 October 2017) by CHAPS Co.

The CHAPS Market Forecasts 2017 predicts that following a period of adjustment post-Brexit, CHAPS volumes will recover in line with the UK and global economy, and with international trade. By the end of CHAPS Co’s ten year horizon, CHAPS volumes are expected to increase steadily, reaching 43.5 million payments in 2026, partly through more focused and specialised CHAPS use.

This resilience in CHAPS volumes is expected partly as a result of the Bank of England’s blueprint for a renewed Real Time Gross Settlement (RTGS) service for the UK. As part of the RTGS blueprint proposals, the number and range of banks and non-banks able to hold settlement accounts and access CHAPS/High Value Payment System (HVPS) directly is planned to grow. The expected increase in direct participation will externalise CHAPS payment traffic, partially contributing to the forecast growth in CHAPS volumes in the long-term.

Furthermore, growth in international payments in the new digital economy is expected to counterbalance Brexit effects on CHAPS volumes and migration to alternative payment methods, particularly in corporate treasury and wholesale financial payments.

Tim Everest, Chief Operating Officer of CHAPS Co, said: “Following significant growth in direct participation in CHAPS during the past three years and with support from the Bank of England’s RTGS blueprint proposals to increase access to the Scheme, CHAPS is set to onboard at record levels in the foreseeable future.

“We look forward to facilitating greater access to CHAPS/HVPS while building on our trusted reputation for settling and delivering high value sterling payments safely, securely and efficiently.”

Following the publication of the CHAPS Market Summary 2017 in June, the CHAPS Market Forecasts 2017 looks into the future growth in usage of CHAPS and how this will be influenced by current and forthcoming economic and industry developments. Key findings include:

  • Net growth of CHAPS volumes to 43.5 million payments (from 39.0m in 2016) is expected in 2026, with average annual compound growth in 2022 to 2026 of 1.9%.
  • Increasing use for settlement payments and supporting high value corporate treasury in CHAPS/ HVPS are expected to be boosted by the presence of non-bank Payment Service Providers (PSPs) with RTGS accounts.
  • Direct participation in the CHAPS Scheme may be further sustained by systemically important participants (and potentially non-bank joiners).
  • Greater interoperability via adoption of ISO 20022, and other planned Real Time Gross Settlement (RTGS) enhancements, could improve CHAPS’ volumes as a result of easier migration between payment methods.
  • Trust in CHAPS is expected to be taken to even higher levels by current and future resilience enhancements.

Dr Herta von Stiegel, CHAPS Co Independent Chair, said“For the past three decades, CHAPS has been providing increasing levels of access and financial stability to the payments industry and it is this ability to adapt to the developing payments landscape that will enable us to continue meeting the evolving payment needs of our current and future Participants and end users.”

Hard copies of the market forecasts will be available at Sibos on 16-19 October. Sibos is an annual conference and exhibition organised by SWIFT for the financial industry with the purpose of debating and collaborating on topics in the areas of payments, securities, cash management and trade.

Download the CHAPS Market Forecasts 2017 from: chapsco.co.uk/media/publications

 

 

CHAPS is the UK’s electronic payment system that guarantees same day settlement finality for high-value payments. It is at the heart of the UK’s payments and financial infrastructure.

CHAPS represents 0.5% of UK total payment volumes but 92% of total sterling payment values (excluding internalised flows within Payment Service Providers).

Following the onboarding of Bank of China Limited and ClearBank Limited in early 2017, CHAPS’ 26 shareholders are: Bank of America N.A.; Bank of China Limited; Bank of Scotland plc; Barclays Bank PLC; BNP Paribas SA; Citibank N.A.; ClearBank Limited; CLS Bank International; Clydesdale Bank PLC; Deutsche Bank AG; HSBC Bank PLC; J.P. Morgan Chase Bank N.A.; Lloyds Bank PLC; National Westminster Bank PLC; Northern Bank Limited t/a Danske Bank; Santander UK PLC; Société Générale; Standard Chartered Bank PLC; State Street Bank and Trust Company; Svenska Handelsbanken AB; The Bank of New York Mellon; The Co-operative Bank PLC; The Governor and Company of the Bank of England; The Northern Trust Company; The Royal Bank of Scotland PLC; UBS AG.

On 9 May 2017, The Bank of England set out its blueprint for a renewed Real-Time Gross Settlement (RTGS) service that will deliver a resilient, flexible and innovative sterling payment system for the UK to meet the challenges posed by a rapidly changing landscape. As part of the blueprint the Bank has concluded that financial stability would be enhanced if the UK’s high value payment system (HVPS) adopted the ‘direct delivery’ model used in the overwhelming majority of jurisdictions globally. This conclusion has been endorsed by the independent Financial Policy Committee and responds to recommendations made by the IMF. Following transition to direct delivery, the Bank will become the HVPS scheme operator (currently CHAPS Co), alongside the Bank’s existing responsibilities for operating the RTGS infrastructure. Direct delivery will give the UK a world-leading HVPS, enabling a single entity to manage risks right across the system, and building on the important progress already achieved by CHAPS Co in recent years. The Bank is working with CHAPS Co and its stakeholders to deliver a swift and orderly transition: the aim is to complete the transition in the latter part of 2017. For more information visit www.chapsco.co.uk