Why there has never been a better time to consider becoming a direct participant of CHAPS

Currently, only 38 participants are directly connected to CHAPS (Clearing House Automated Payment System), with most connecting through indirect agreements.

Many prospective participants choose not to pursue direct participation due to strict entry requirements, long onboarding processes, complex technical & operational requirements thus making it a challenging process.

As part of the Real Time Gross Settlement (RTGS) Renewal programme, Bank of England are aiming to simplify the access requirements and onboarding processes, to expand direct participation and align with the G20 roadmap to enhance cross border payments.

This blog explores why Payment Service Providers (PSPs) may now wish to consider becoming CHAPS direct participants, the current challenges in joining the scheme and the Bank of England initiatives to encourage direct participation.

Why join CHAPS as a Direct Participant?

With Bank of England opening onboarding slots to join CHAPS in the second half of 2025, some of the key benefits to join CHAPS for banks have been outlined below:

1. Customer experience: Improved offering to customers with the ability to submit payments nearer to the CHAPS scheme cut off. Better reporting using non-payment messages for reconciliation.
2. Cost: Direct participation can eliminate intermediary bank fees and offering indirect clearing and settlement services to other banks/FIs would provide additional revenue.
3. Financial stability: Increase assurance by managing cash flow more effectively with less reliance on a partner bank for daytime exposure facilities.
4. Industry engagement: Being a direct participant provides early visibility of mandated scheme changes as well as greater influence in key discussions to help shape the Bank of England strategic roadmap for CHAPS and RTGS.

Icon has worked closely with many direct participants of CHAPS, supporting in Product Ownership roles and the development and delivery of MX messaging from a technical perspective.

Current challenges

Prospective direct participants can face significant challenge to build a business case and subsequent implementation plan due to various constraints, including:

Technical integration : PSPs face significant technical challenges integrating with the Bank of England’s complex requirements including extensive and lengthy testing activities.

Onboarding : The current 12-18 month onboarding process and lack of more frequent joining slots to the CHAPS scheme.  Building a business case from a technical and product perspective can lead to an extensive process to go live with CHAPS.

Access: Regulatory barriers and access to CHAPS/RTGS exist including the need to meet strict requirements by the Bank of England, FCA and PRA which can be a particular challenge for indirect participants to justify going through the onboarding process.

Bank of England initiatives to encourage direct participation

Icon takes a proactive role in understanding the relevant industry initiatives and consultations that will have an impact on the CHAPS payment scheme.

Simplified technical integration

In June 2023, the Bank of England made the switch from MT to MX messaging with the launch of ISO 20022 bringing the UK High Value Payment System (HVPS) in line with many other high value payment schemes such as T2, SIC, FedNow and Swift cross border payments (CBPR+). This reduces the cost and effort to build the messaging flows for UK CHAPS.

The Bank of England has taken steps to implement a set of external facing read-only Application Programming Interfaces (APIs) designed to enhance the resiliency and ease of accessing information with the RTGS system.  There are future plans to provide APIs to submit payments. This would simplify technical integration as most PSPs have API access capabilities.

Since 2022, participants have seen significant improvements from a technical perspective with the Bank of England allowing the use of Cloud Service Providers.  These changes enable PSPs to leverage their existing cloud infrastructure/provide wider options to choose their connectivity suppliers.

Efficient onboarding process

The Bank of England has stated it wants to introduce an easier and more streamlined onboarding process to CHAPS to improve competition and stability.  This will include more frequent joining slots and reducing the current onboarding timelines of 12-18 months whilst balancing risk and resilience. There are also plans for introduction of a Test Simulator to support CHAPS participants using automation and less reliance on ‘buddy banks’.

In recent years Bank of England has extended access to RTGS accounts for non-banked Payment Service Providers (PSPs) as well as the creation of Omnibus accounts in 2021.

Extending operating hours to CHAPS

Bank of England have responded to a recent consultation on extending the current operating hours for RTGS.  The initial proposal consists of extended operating hours on weekdays starting at 1:30am.  This would have many positive benefits for CHAPS participants as this would provide a greater time zone overlap with the EU and APAC regions, enabling more efficient cross-border processing.

Similarly for the UK domestic market it would reduce significant peaks in volume and value at the CHAPS start of day making managing liquidity easier.

How Icon can help

Having experience of working with Tier1 as well as start-up banks, Icon can support building a business case for joining the CHAPS payment scheme as a direct participant outlining the customer benefits, potential product offerings, cost savings and operational & cash flow efficiency.  By conducting an impact assessment, PSPs will understand the business, technical and operational changes and the cost and time implications of onboarding.

Contact us on how Icon Business and Technology Architecture consultants can prepare you for this journey.