Today has seen the successful launch of a new payment system for processing cheques and similar payment instruments in the UK – the Image Clearing System (the ICS). The ICS is operated by Travers Smith's long-standing client, the Cheque & Credit Clearing Company Limited (the C&CCC).
The ICS revolutionises the way banks and building societies clear cheques and similar instruments. Using cutting–edge technologies at the forefront of international best practice, the system will significantly speed up clearing times throughout the UK. In addition, financial institutions will be able to offer customers a service to deposit paper payments through smartphones, tablets and other electronic devices, and so save them a trip to the branch.
This has been a ground-breaking and highly innovative legal project which has taken a number of years to bring to fruition.
The Travers Smith team was led by Financial Services & Markets Partner Mark Evans and Commercial, IP and Technology Partner Louisa Chambers, and also included Commercial, IP and Technology Partner Dan Reavill, Finance Partner Jonathan Gilmour, Competition Partner Nigel Seay, as well as Associates Natalie Lewis, Joseph Wren and Vanessa Battaglia.
The team has:
- (in conjunction with the C&CCC) helped HM Treasury devise a new statutory framework, including primary and secondary legislation, to support the electronic presentment and settlement of cheques and similar instruments
- together with Scottish and Northern Irish counsel, determined the legal and regulatory viability of instrument imaging as a substitute for processing physical instruments
- advised on robust risk management procedures to control the operational, settlement and systemic risks associated with instrument imaging
- been closely involved in an extensive consultation exercise with stakeholders to explain the changes proposed and the benefits associated with image processing, and to resolve market issues
- developed, agreed and negotiated with the payment services community and other participants a new rulebook and contractual framework to govern the ICS and participation in it, as well as a pre-launch testing exercise
- provided extensive support on data protection, confidentiality and related commercial law issues
- helped to put in place (in conjunction with the C&CCC and in close liaison with the Bank of England) pre-funded reserve collateralisation arrangements to support the safe intra-day settlement of inter-bank exposures arising under the ICS
- assisted the C&CCCC to obtain all necessary regulatory approvals and designations, including those required for settlement finality and the status of the ICS as a regulated payment system under the jurisdiction of the Payment Systems Regulator.
Travers Smith has an unparalleled reputation for its market-leading work on managing complex, paradigm-shifting financial market infrastructure legal projects operating at the heart of the UK's financial system. In recent years, the firm has advised on the dematerialisation of equities, gilts and money market instruments; cross-border models for the settlement of international securities; the introduction of netting and central counterparty services to the cash markets; and the delivery of real-time gross settlement payment systems in central bank money.
Mark Evans, Travers Smith's relationship partner for the C&CCC, said: "It has been a privilege for me and the Travers Smith team to have been so closely involved in the successful launch of the ground-breaking ICS project. The introduction of faster cheque clearing has involved the creation of a completely new payments system – it is not a simple overhaul of the existing clearing process. The eagerly-awaited introduction of the ICS today is not only a testament to the professionalism and dedication of the senior management at the C&CCC, it is also a clear statement of the fantastic support that can be provided to our clients by a close-knit, cross-disciplinary Travers Smith team delivering seamless advice across complex and blue sky regulatory, commercial, IP, data protection, banking, insolvency and competition issues.
The legal and regulatory landscape for payment services and the UK's financial market infrastructure remains dynamic and ever-changing. Travers Smith looks forward to continuing its part in helping our clients to maintain the UK's pre-eminent global reputation for innovation, service-user experience and competition in the payments and market infrastructure space."
James Radford, Chief Executive Officer of the Cheque and Credit Clearing Company, said: "Introduction of the Image Clearing System in the UK brings the cheque firmly into the 21st century, safeguarding its use for the millions of people that rely on it as a trusted and reliable payment method. The new system means that cheque recipients will be able to access the funds from the cheques they pay in faster than ever before, which is fantastic news for the individual consumers, businesses and charities who wrote nearly half a billion cheques last year.”