Discussions at this week’s EBAday in Milan will be dominated by SEPA Instant Payments which will help consumers make a cross-border euro payment in less time than it takes Usain Bolt to run 100 meters. The payments industry has seen rapid changes in recent years driven by consumer demand and the explosion of Fintech companies. Consumers are now so used to the convenience of retrieving instant information via their phone or tablet that they expect payments to be instant and banks need to ensure that payments are instant both domestically and cross border.
Leading the charge for the development of a SEPA Instant Payment service are the European Central Bank (ECB) and European Retail Payments Board (ERPB). SEPA (Single Euro Payments Area) is backed by the European Union and aims to simplify and integrate bank transfers denominated in euro. It includes 28 European Union member states, the four member states of the European Free Trade Association (Iceland, Liechtenstein, Norway and Switzerland), as well as Andorra, Monaco and San Marino.
Instant payments are defined as 24/7 availability, immediate reusability of funds and close to immediate interbank clearing according to the ECB. Initially, for SEPA Instant Payments there will be a maximum transaction limit of €15,000 with an expectation that funds will be in the account within 10 seconds.
Real-time payments in themselves are nothing new. There are some twenty countries around the world that are either already experimenting in this field or are moving towards doing so. In the UK, for example, the UK Faster Payments Service, an accelerated posting system for Pound Sterling (GBP) payments takes between 15 minutes and two hours – but this is not instant. All the above are also domestic services, SEPA Instant Payments will be the first cross-border instant payments service.
Developing such a service does not come without challenges such as immediate reconciliation, transaction validation and screening and settlement process to name but a few. Additionally, the European Banking Association (EBA) is working with a number of its members to develop and implement a SEPA service with a planned live date of November 2017. The EBA is one of a number of Clearing Settlement Mechanisms (CSMs) that currently clear SEPA transactions – other larger SEPA CSMs include STET S.A and Equens. With these other CSMs also looking at developing a SEPA instant payment capability, to ensure interoperability, it is clear that they must all work to a standard set of guidelines and processing rules which are, as we speak, being defined.
No questions about it though, real-time payments are the future.
Jeff Hawkes, Product Manager for EUR and GBP at BNY Mellon will be attending the EBAday in Milan between 7th and 8th June where the development and implementation of a SEPA Instant Payments service will be a key topic of discussion. EBAday is hosted by the Euro Banking Association and Finextra Research and is one of the industry’s leading forums to learn, discuss and debate the key trends driving change in the payments industry.
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