Instant Impact: Lessons Learnt in the Wake of the Instant ... · we have learnt soa far are...
Transcript of Instant Impact: Lessons Learnt in the Wake of the Instant ... · we have learnt soa far are...
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On 21 November 2017 the EuropeanPayments Council’s instant paymentsscheme, SCT Inst, went live across theSEPA zone’s 34 countries, with 17 banksoffering payments in real time. UniCreditwas among them – becoming the first bankto process a cross-border transaction fromGermany to Italy in just 2.5 seconds. Since
that day, coverage has extended to 20banks from eight countries, showing strongcommitment to the cause. The results,meanwhile, have been remarkable – withcorporate and retail usage figures bothexceeding expectations as banks press onwith implementation and try to maximisevalue for clients.
T he dust has now settled on the launch of the European Payments Council’sSCT Inst scheme, which went live across Europe in November 2017. Sixmonths on, Thomas Dusch of UniCredit takes us through the lessons learnt
– arguing that excellent client uptake and system stability are reasons for optimism,while collaborative solutions must still be built before instant payments become thenew normal.
By Thomas Dusch, DeputyGlobal Head of GlobalTransaction Banking,UniCredit
Instant Impact: LessonsLearnt in the Wake of theInstant Payments Launch
Coverage of SCTInst has extendedto 20 banks fromeight countries
since itsintroduction inNovember 2017.
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Ensuring an efficient end-to-endprocess for corporates, initiating bulkpayments, and managing exceptions andreporting are all topics that need to beaddressed going forward, yet the lessonswe have learnt so far are overwhelminglypositive – with the number and range oftransactions proving greater thanexpected, while the system has shown itselfto be remarkably stable. The pieces arefalling into place, and work is under way toensure that instant payments become thede facto payment option for businessesacross Europe.
Experiences so farA number of trends and takeaways haveemerged over the past few months. Firstly,we’ve witnessed a surprisingly highnumber of transactions – at least one thirdgreater than expected. That this points tostrong interest among users goes withoutsaying. When you factor in the limitedcoverage and non-mandatory nature of theSCT Inst scheme, such high figures suggestthe groundswell of support for instantpayments is far greater even thanpredicted. This interpretation is bolsteredby the fact that roughly two-thirds ofinstant payments so far have been C2Cretail and online banking transactions,where the client has actively chosen tomake an instant payment over anotheroption. Roughly a third of these transactions
took place in the C2B space. Again, this ishigher than expected, perhaps driven byexisting customer expectations regardingspeed and convenience. Certainly, thereare clear benefits to instant payments inthis respect. Mandatory feedback onunsuccessful transactions providessecurity and certainty to the client, andthere is increasing recognition amongcorporates that instant payments’transparency and speed make them acompelling option. The average value oftransactions – falling in the low-four-digitrange – suggests that these benefits haveled to greater engagement from businessesthan initially projected.All this is a reason to celebrate. Instant
payments are proving a hit in terms of userengagement, and the core systemsthemselves have handled the traffic almostfaultlessly. Since going live in November,
the system is yet to suffer an outage, while95% of all transactions have beenprocessed within three seconds – wellunder the prescribed EPC target of 10seconds.
Ironing out the creasesHowever, instant payments are still in theirinfancy and will require careful rearing toensure they become a mature and fullyfunctioning payment method. Oneteething problem is that instant paymentscannot yet reach every type of account. Forinstance, saving accounts and foreigncurrency accounts cannot be addressedyet. Exception handling of payment
messages is another concern. Whentransactions are refused, banks arerequired to inform the client, but feedbackmessages from other banks are often notspecific enough to pinpoint or identify thereason, meaning banks are forced to passon unclear feedback to their client. The ultimate goal, of course, is for all
accounts to be reachable by SEPA andinstant payments. This is a small gap thatneeds to be closed, yet additional rulesmust be defined to do so. To support thisprocess, the usage of standardised returnreason codes is needed to provide a clearindication of how transactions can beexecuted via different payment methods,having been refused by the current one.Making return reason codes more precise,and harmonising rejection codes, is vital toensuring the payment process doesn’tbreak down upon refusal.With this in mind, an EBA-Clearing
working group has already beenestablished to develop a harmonisedcatalogue that will provide guidance forexisting and new participant banks, andimplement standards to give bettersupport to originating banks. Defining how corporate clients can
initiate bulk instant payments is anotherimportant issue. The vast majority ofcorporates want to use instant paymentswithin the SEPA system, but demandminimal disruption – they expect theoriginator bank to re-route paymentsautomatically if instant payments arereturned or beneficiary banks do notsupport instant payments. Again,standards need to be defined and feedback
Instant paymentsare still in theirinfancy and willrequire carefulrearing toensure they
become a matureand fullyfunctioning
payment method.
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Banks need toknow whatinformationcorporatesrequire, andprovide therequested
information inreal time.
messages expertly designed in order tosolve this issue.
End-to-end efficiency Other clients have raised the issue thatthere is no direct trigger system whencustomers pay invoices via instantpayments, which means the next step inthe process cannot be initiatedimmediately. To solve this, banks and corporates
must work together. Banks need to knowwhat information corporates require, andprovide the requested information in realtime. Currently, batch-type approacheslimit banks to providing this informationvia advice notes, e.g., every 30 minutes orso, but the emergence of APIs offers theopportunity to close this gap through
enriched, instant client services built onshared data – a win-win scenario.The challenge lies in linking together
corporate Enterprise Resource Planning(ERP) software with bank systems to bringabout instant information feedback, but,once overcome, entire processes can beautomated to run in real time, dovetailingwith wider industry 4.0 and digitalisationaims. This is, of course, a long-term goal, but
the first step has already been taken. Astandardised system for continent-wideinstant payments is now in place. Thenatural – and vital – next step is increasingcoverage and expanding the markets thatcan handle instant payments. Beyond that,the future is open for banks and treasuriesalike to work in tandem – embracing a newhost of real-time efficiencies. �
Thomas Dusch
Deputy Global Head of Global TransactionBanking, UniCredit
Thomas was appointed Deputy Global Head of GlobalTransaction Banking in March 2018, having previouslyserved as Co-Head of GTB Germany since 2016. Prior to this,he was Head of International Trade Finance Sales Germany,covering CIB multinational corporate clients in Germany.Thomas also served as the Managing Director at UniCreditCorporate and Investment Banking in New York, USA, until2014, where his responsibilities included the coverage ofAmerican clients.
He has a degree in Business Administration and Management from Ludwig-Maximilians-Universität in Munich.