Substitution between RTGS and instant payment schemes: the impact of the 2022 Faster Payments transaction limit increase on CHAPS

In February 2022, the UK’s instant payment scheme, Faster Payments, increased its transaction value limit from £250,000 to £1 million. This provided payments in this value range an alternative means to settle. Using a range of methodologies, we study the subsequent impact on the number of payments settled through CHAPS, the UK’s high-value payment scheme that settles payments on a real-time gross basis. We find strong evidence of substitution away from CHAPS to Faster Payments. Specifically, CHAPS volume between £250,000 and £1 million is, on average, between 10.7%–13.7% lower than if Faster Payments had not increased their transaction limit. Furthermore, we find substitution is far greater for customer credit transfers and lower-value payments. These results provide some of the first clear empirical evidence of meaningful substitution from real-time gross settlement schemes to instant payment schemes, raising important implications for payment system operators and the future role of different settlement models.