Published on 13 August 2019

Having taken a break from following the governance of Pay.UK for a while, a quick skim underlines the prevailing chaos. We have already written about the ditching of a key feature of ISO20022 XML and the broken governance arrangements that have permitted this.

There is a claim to openness about Pay.UK’s affairs, but this is belied by both the style of minutes and their incomplete chain. The Board Minutes of 10th April mention approval of the minutes of Board Meetings on 27th February, 13th March and 29th March – yet only those for 13th March have been put up on the website. Why? We have enquired three times but received no response so far beyond that Pay.UK will respond in due course.

Openness would be fostered by informative minutes, not ones written in the habitual abysmal style aimed at obfuscation or making use of the get-out clause “Redacted – commercially sensitive” at Pay.UK’s discretion: we have no way of knowing whether the missing content really was commercially sensitive or just embarrassing.

The deadpan, euphemistic style permits the most outrageous matters to be glossed over. For example, the minutes of the 10th April meeting show that some members of the End User Advisory Council also sit on the Industry Standards Coordination Committee, a gross conflict of interest and a governance malfunction on the part of Pay.UK – but aside from PH (Paul Horlock – the Pay.UK CEO) going to have a word with JW (James Whittle, the Head of the Standards Body), no other action is planned. AB (Anna Bradley), a NED and the chair of the End User Advisory Council, was at the table and could have undertaken there and then to procure that all members of that Council who were also on the Committee (which differs in what way from a Council?) would resign from one or the other and be replaced. But she did not, and no other Board Member stated that the Board could remedy the issue themselves.

Similarly we have the alarming mention in the minutes of the 8th May meeting that a letter dated 30th April had been received from the Bank of England regarding the New Payments Architecture (“NPA”) project, listing lessons to be learned from the Image Clearing System (“ICS”) project for cheques. It is per se a serious matter for the central bank to address itself to a payments body on a project that the payments body was responsible for.

Pay.UK Board Minutes have mentioned the important ICS project occasionally and offhandedly, implying it is not really anything to do with them, NPA being their main concern. This positioning was adopted as from this statement: “MH (that is Matthew Hunt, COO of Pay.UK and in charge of NPA) reminded the Board that the NPSO had inherited the live Image Clearing System (ICS)”[1], although judging from later euphemisms the word “live” was overstating things.

Subsequent Board minutes about ICS bear all the hallmarks of a fiasco, however euphemistic and deadpan the language: “An external incident with ICS had been managed well by the team”[2] (aka the thing fell over), “encouraging increase in volumes being seen through ICS and advised that the rate of growth was expected to accelerate in the coming months”[3] (aka take-off has been glacial), “ongoing discussions with participants to ensure that the project continued to move forward”[4] (aka it is well behind schedule), “update on the position in Cheque & Credit regarding participants’ readiness for the introduction of ICS..[Redacted – commercially sensitive]”[5] (aka no-one is ready and we do not want to publicise by how much), “Several participants were having internal difficulties in feeding data through to the system in a measured way, causing some capability difficulties”[6] (aka it doesn’t work).   

MH was keen to position ICS as an inherited problem, but whether it pre-existed Pay.UK’s takeover of the Cheque & Credit Clearing Company on 2.7.18[7] is beside the point. Pay.UK took nominal ownership of ICS when it should have taken complete ownership and driven the project forward. ICS was not live in any meaningful sense in July 2018 but Pay.UK has treated it as a sideshow.

The lessons must be harsh ones if they are being spelled out by the Bank of England, but the minutes once again are silent on what the lessons are, what their significance is for the NPA project, and what actions the Pay.UK board has decided upon to ensure that the take-aways from the ICS really are learned and applied to NPA.

Instead we are left with the distinct impression of a Board who are not impressed by anything, don’t know what the correct response is, undertake no actions, and generally just allow things to take their course.

Then we have the vexed matter of what entities actually make up the cohort of Member/Guarantors of Pay.UK, which has come to a head in the matter of iPagoo/Orwell, an eMoney Institution that went into receivership on 1st August 2019, having been amongst the first non-banks to obtain a Settlement Account at the Bank of England, and become a member of CHAPS, BACS and Faster Payments.

There is nothing in any published Pay.UK Board Minutes about iPagoo/Orwell at all, although the company was a member of two of Pay.UK’s payment systems: they were admitted, and now they are no longer members. Perhaps this was the matter of the Board meetings on 27th February and 29th March. Perhaps a Potential Expulsion Notice as a Member/Guarantor of Pay.UK itself was issued pursuant to Art26.4 of Pay.UK’s Articles by the 27th February meeting and confirmed at the 29th March meeting, even though Art26.5 states that the Pay.UK Board, having issued a Potential Expulsion Notice, must decide definitively about it at their next-following Board meeting, which was on 13th March.

Being a member of two of Pay.UK’s systems, it would be surprising if iPagoo/Orwell was not a Member/Guarantor of Pay.UK as well. We have asked, but to date no response has been received.

It really would be a fiasco if a Member/Guarantor had to be expelled only a few months after being admitted. However it seems unlikely that the Board had grounds to expel iPagoo/Orwell, because Pay.UK’s Articles are so weakly drafted. Art26.3 deals with grounds for expulsion, and Arts24.4 and 24.5 deal with the process. The cases for expulsion are very limited. Only recently – when iPagoo/Orwell went into receivership on 1st August 2019 – has an “Insolvency Event” occurred that, according to Art 26.3.a, gives the Board the right to terminate their membership. iPagoo/Orwell did not cease to meet the rather lax “Eligibility Criteria” (Art26.3.b), nor has it acted or threatened to act in a way contrary to Pay.UK’s interests (Art 26.3.c.i), nor has it moved to a sanctioned jurisdiction (Art26.3.c.ii). So in all likelihood Pay.UK’s Board had no right to expel iPagoo/Orwell when its business became subject to intense FCA scrutiny and its memberships of CHAPS, BACS and FPS were terminated, but had to wait until it went into receivership. In the meantime Pay.UK had a cuckoo in the nest that it could not turf out.

The whole issue of admission to Pay.UK membership and who are its owners merits a more detailed examination, which will follow shortly.

[1] 5.9.18 meeting

[2] 10.4.19 meeting

[3] 13.3.19 meeting

[4] 13.2.19 meeting

[5] 16.1.19 meeting

[6] 10.10.18 meeting