Pay UK announced this week that they are amending their Net Sender Cap (NSC) Requirements for participants in the UK’s Faster Payments scheme. This will allow financial institutions to decide their own cap and give them the freedom to manage liquidity and allocate funding in a way that’s aligned with the nuances of each business model. This flexible approach sounds great, but if scheme participants want to take full advantage then they still have work to do.
Get this wrong, and it won’t solve the underlying problem of liquidity. In fact, it could actually increase liquidity risk and costs.
Remember, it’s vital to set NSCs correctly. Too large and you are tying up expensive collateral unnecessarily, too small and you run the risk that payments can’t be settled. By shifting the NSC-setting responsibility onto institutions in the scheme, it’s now up to them to justify and evidence their NSC. Doing this right requires additional analysis, such as forecasting and risk modelling, not to mention the additional operational effort. Liquidity risk management now sits with the scheme participant.
Participants must produce advanced forecasts, then negotiate their individual stress contingencies with the scheme. Then, and only then, can they set their own Net Sender Cap.
But we’ve observed that institutions lack the tools and methodologies to do this well. This will likely mean an increased stress and contingency component that removes any benefits from the new flexible NSC.
Pay.UK say this change is promoting a diverse and competitive ecosystem with increased flexibility and efficiency.
This can be true, but only when institutions step up and take responsibility.
NSC levels across the scheme will likely stay elevated until institutions gain the data and foresight to size their own NSCs.
Scheme participants lack the tools, data and analytics to set and justify a lower NSC and reduce their expensive liquidity buffers. That’s where Planixs comes in. Our solution Clariti solves the problem with real-time liquidity data combined with forecasting future intraday liquidity needs, allowing institutions to take full advantage of their NSC and optimise their scheme liquidity.
Our solution brings ‘Clariti’ to treasury teams across Europe already. Now, participants in Faster Payments stand to benefit too.
Introducing Clariti for instant payments
Planixs Clariti is a world-first solution that empowers financial institutions to manage their liquidity in the 24/7 world of instant payments. Clariti unlocks live visibility on liquidity, helps teams intelligently forecast liquidity usage and report for analytical and regulatory purposes.
