## 3 Smart Money
### Smart Money with CBDC Within the New Payments Architecture  
At the core of the Smart Money ecosystem sits a private and permissioned distributed ledger network. Financial institutions (e.g., banks and payment service providers), government departments (e.g., Bank of England, HMRC, and ONS) are direct participants in the Smart Money system by means of dedicated nodes. In addition to payment and banking services through traditional channels, financial institutions provide CBDC wallets to their customers. Within the Smart Money system, these institutions are called CBDC wallet providers (CWPs). In the payments network, the CWPs continue to offer their services as in their traditional role of PSPs. In the Smart Money system, they provide CBDC payment services but also serve as gatekeepers of their customers' payments data. These data then become available to government departments that are pre-authorised, such as HMRC for automating tax collection. Financial institutions that offer payment services can operate under one of the following regimes:  
* Operate exclusively on the payments network and interact with the Smart Money system through a correspondent CWP.
* Operate exclusively on the Smart Money system and interact with the payments network through a correspondent PSP.
* Operate on both networks with a dual PSP/CWP role.  
The Smart Money system is designed to operate as an overlay to the standard payments network and records all the payments on a distributed ledger which is shared among its participants. The CWPs that participate in both the distributed ledger and payment networks serve as bridges between the two environments. When a CBDC wallet holder (equivalent to an account holder in the traditional banking sense) issues a payment through the payments network, irrespective of the selected money instrument (CBDC or bank money), their corresponding CWP copies the message from the payment network to the Smart Money system, acting as a bridge between the two layers.  
The integration of Smart Money with the payments network becomes more relevant in the wake of the forthcoming change to the UK's payment system called New Payments Architecture. The NPA adopts the ISO20022 [28] messaging standard and introduces the following two key features of great importance to governance and oversight:  
1. Enhanced data: payment messages will now carry additional information related to utility bills, invoices, salary payments, and financial assets in a standardised, structured format.
2. Request-to-pay: billers will be able to request payments from their customers through the payment system instead of sending an invoice or bill through conventional channels (e.g., e-mail, post).  
These novel features will enable suppliers to input granular data associated with the transaction within the payment message and transmit that information directly to their customers, who can respond to that message and fulfil the payment request. This process creates a money trail of that particular transaction which matches the payment with its associated metadata. This particular money trail is replicated on the Smart Money system and stored on its distributed ledger as part of the payment's lifecycle.