What Banks Can (And Should) Do to Prepare for the Launch of Pan-European Instant Payments
The pan-European Instant Payments scheme (SCT Inst Scheme) launches in November 2017, offering banks throughout Europe the opportunity to create real-time services for their customers. I spoke with Domenico Scaffidi, principal solution consultant for ACI Worldwide, about what banks can – and should – be doing to prepare for the launch of the scheme.
Katrin Boettger: The pan-European Instant Payments Scheme (SCT Inst Scheme) will go live in a little bit more than a month. What are the expectations of these schemes among banks in Europe?
Domenico Scaffidi: There is a sense of excitement and urgency in the air; the holiday period is over and banks understand there is not much time left to make serious plans. 2017 started with a lot of unanswered questions, one of them being TIPS (TARGET Instant Payment Settlement) and the fact that many banks did not understand what it was. Then there is PSD2 and the question of whether banks should merely be compliant with the new regulation, or whether PSD2 goes beyond that and offers benefits that a bank should consider. To give you an idea, I am spending most of my time discussing these issues with banks and supporting them in adapting their business cases and sharing use cases.
KB: Instant Payments will bring a lot of new opportunities for banks in Europe; how can they implement their systems on time for the ‘big party’?
DS: Good question. To put it bluntly, there is no time. Having worked previously as Head of Payments Systems and International Business Applications for a large Italian Bank for more than a decade, I know from direct experience how complex the integration of a new system into the bank’s traditional infrastructure can be. But there are good alternatives, such as opting for a cloud solution that is already preconfigured and connected to an IP scheme. This option will allow much faster onboarding, and is much more cost efficient. For many banks, this will be a good ‘time to market’ solution.
KB: Let’s talk about PSD2. Many banks still think that being compliant with the new regulation when it comes into effect in January 2018 will be enough. Do you think they are doing well? Is that all they need to do?
DS: Banks should not treat PSD2 as a compliance project, which seems to be what some are currently doing. However, some banks are thinking further ahead and see PSD2 as an opportunity to change current business models.
KB: How important will it be to respect the ’15 second rule’ the EPC rulebook has set up as the maximum time for an instant payment transmission?
DS: In many ways, the ‘15 second rule’ is already obsolete. The EBA Clearing RT1 Service, for example, is positioned between 1.5 and 5 seconds. The ambition should be to reduce this time even further. The fact of the matter is, if the service is not competitive and fast, clients will lose interest. Customer demand and customer experience will be the drivers behind all new services.
KB: What about liquidity management? I am aware of reports that some banks who originally had planned to go live in November 2017, will now postpone their go live dates because of the liquidity issue. What does that mean?
DS: Yes, some banks did change their minds after discovering their IP solution didn’t consider the LQ aspects. In the era of instant payments, no business day will go by without dealing with liquidity. It sounds like a treasurer’s nightmare, considering it is almost impossible to determine the right flow of money in a scheme where it is mandatory to reserve the right liquidity during nights, weekends and bank holidays.
To deal with this new challenging scenario, banks will need a proper solution, one that is not only based on technical functions, but also on a set of liquidity management functionalities (to deal with this new atypical LQ situation).
KB: There is another issue which has emerged recently; banks are worried about overloading their systems with automatic traffic (for example if another bank is down, then sending the investigation messages etc.) Is this a real problem?
DS: Based on our experience, we know that just one Instant Payment transaction can generate dozens of statements, so yes, theoretically, this risk exists. Again, with the right solution it will be possible to avoid this kind of unpredictable situation. For example, a cloud solution could help with this issue, considering all transaction data will be stored in a data centre.
KB: One final question. Considering some of the controversies and confusion around IP, do you think banks should wait, or join the pan-European scheme now?
DS: All things considered, I would say that a bank that decides to wait could potentially make a big mistake. I think that once banks start to look at the business case and understand that real-time payments are not just an investment into new IT, but crucial to surviving and competing in the new era of digital banking, things will fall into place. Banks across Europe are beginning to understand that customers want these new services, and they have started to feel the pressure from their competitors.
ACI’s UP Immediate Payments solution provides a complete range of capabilities that are easily tailored, enabling fast, flexible and cost-effective implementation of immediate payments.
Related Blog Posts
Beyond Borders: Navigating the Challenges of eCommerce Expansion
eCommerce continues to flourish, with impressive growth figures year after year. In 2018, global online sales reached almost $3 trillion, and are expected to hit $4 trillion by the end of 2020.
Despite eCommerce taking an increasing slice of the retail pie (which could now be as high as 15 percent according to recent figures), it is increasingly challenging, with competition and cost pressures creating significant issues for merchants of all sizes.
Payments and Fraud: The Paradox Twins
Digital commerce through web and mobile is where merchants predominantly experience shopper growth today. This has become a hugely important domain for their focus. It offers a means for international growth, new market penetration and a way to engage with shopper-hungry Millennials in their culture. Merchants frequently adopt a Digital-First, eCommerce-First or Mobile-First strategy to ensure full corporate buy-in to this strategy.
Open Payments Systems for Merchants: Don't Close Down Your Options
Remember “Open Systems”?
It was a big industry nom du jour in the 80s and 90s. Every IT system had to be open and therefore flexible and future-proof. Nobody can argue with the logic behind this; making systems easy to integrate with other systems, ensuring vendors could cooperate with one another; creating agility to improve time to market and drive down costs.
Knowing New Customers – And How Shared Data Helps in Fighting Fraud
As the eCommerce industry continues its rapid growth, the lines between physical and digital shopping are becoming increasingly blurred. These changes are creating a number of challenges for merchants, not least around customer visibility and fraud prevention.
Why Non-Functional Requirements Should be a Few of Your Favorite Things
It’s not unusual for me to be questioned by retailers as to why some payment solutions are priced differently or more expensively than others – in fact, it would be unusual not to be asked those questions when dealing daily with procurement and finance teams of major multi-national multi-channel merchants!
Adding a Global Payments Layer for Future Growth
Digitization has changed the payments industry completely and irrevocably. Cash payments are in full retreat, as more people pay digitally – with more than 1.6 billion people now shopping online. The digital customer expects an extremely fast and convenient payment experience, with high security standards, and immediate availability of payments information.
Major League Baseball’s Tampa Bay Rays Tell Cash, “You’re Out!”
As a lifelong baseball fan and former resident of Tampa, Florida, I had the pleasure of spending a summer night or three at Tropicana Field, watching my beloved New York Yankees take on the hometown Tampa Bay Rays. And as a fan of cheap tickets, air conditioning in the Florida summer and plenty of great seats, I always enjoyed the “The Trop” despite its poor reputation.
Let’s Get Phygital: eCommerce Is Coming To A Store Near You
While payments vendors continue to pitch and strategize with a focus on omnichannel, the omnichannel story has already moved on.
Make no mistake – omnichannel remains important and the best vendors have solutions that provide a single cloud payments service capable of delivering a single view of the customer across stores and digital channels. And the best retailers utilize these solutions to deliver efficient cross-channel shopping experiences. Meanwhile, many other retailers get by (though seldom rise to the top) with a siloed approach.
Around The World: Taking Stock of Global eCommerce in 2019
As I head to #NRF2019 in New York City next week, I’m excited to see how some of the biggest retailers and merchants see the industry evolving over the coming year. What trends they think are going to shape 2019, and which of 2018’s buzzwords can be put to bed.
Fraudsters Don’t Wait for Peak, So Neither Should You: 2019 Fraud Strategy Starts Now!
In existence for barely two decades, eCommerce has transformed not only the way we shop, but also how retailers plan and execute their marketing strategies around the peak shopping season. Now that we’re deep into this period, retailers will have prepared for changes in buyer behaviors, relaxed their strategies to be within the limits of manageable review rate, and most important of all, put strategies in place for increased fraud attempts.