SEPA Instant Payments: The Importance of Real-Time Hubs in a Global Market
An epiphany is happening across Europe—and across the global markets. I’m not talking about the realization of Brexit (and that we’re all going to need to make it work). But rather, the realization that payment hubs that were brought in to manage SEPA batch credit transfers and direct debits are not going to be capable in the real-time world of SEPA Instant Payments.
For starters, SEPA Instant Payments is about individual payments that can occur at any time of the day— 24x7x365. However, upon closer review, SEPA instant payments are much more complex. Between real-time fraud scanning, accounting decisions and postings, customer advices and clearing—all within a fraction of a second—the market is realizing that there is a huge gap between commonly cited requirements from a few years ago and what is needed in today’s market. The existing hubs can perform the processing, but not within the timeframes that real-time payments demand.
End to end, a payment within some countries will need to complete in 5 seconds. That includes both sides of the payment, with real-time postings in addition to the work that the central infrastructure needs to do too. That means just 1.5 seconds for a bank to do all the necessary corresponding processing, for hundreds (if not thousands) of payments…every second. Never before has latency of a transaction been so scrutinized ahead of the decision regarding which solutions to include in an RFP process.
A real-time hub cannot be a marketing creation. No amount of PowerPoint is going to cover up the lack of non-functional requirements embedded in a payments process. Active:active dual site, low latency, scalability and agility have all become table stakes in the next-generation design of real-time payments hubs. The hub will need to orchestrate the payment process in real time across the bank’s processes, validation, fraud, funds, account checks, etc. – within the 1.5 second timeframe.
Real-time payments is now a global initiative: lots of countries are live and many are building real-time payments capabilities, so any decently sized bank that does business outside of its country will have to connect to multiple new schemes or RT-CSMs. Therefore, just having a real time engine is (once again) not good enough. Real-time hubs are required to manage connectivity to all these schemes—in addition to routing and liquidity capabilities.
Given these vast changes in the payments landscape, it’s not surprising that we are seeing a sudden surge of banks entering the market for a new hub; even when they had already purchased a hub just a few years ago. The market--and relevant technology—has changed, and banks are suddenly realizing these new realities as they start to evaluate the requirements and go-to market plans needed to prepare for the real-time world.
My colleagues and I will be discussing the topic of SEPA Instant Payments during a series of short sessions on our stand (Booth F59) at Sibos.
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