Obstacles exist for banks to meet ECB’s instant payments goal

The cost of joining instant payment platforms will be one of many hurdles banks and payment services providers must overcome to meet the European Central Bank (ECB)’s 2021 instant payment target, according to the head of cash clearing services at Societe Generale.

“It is [the expense which will be of concern], plus all the evolution on ISO 20022, plus the new Single European Payments Area (Sepa) scheme which is going to come in 2022. It is the accumulation of regulation,” says SocGen’s Jean-François Mazure.

On November 26, Reuters reported that Valdis Dombrovskis, European Commission vice president, told a conference he expected instant payments to be available across Europe by the end of 2021.

“By that time, everyone in the EU, people and companies, should be able to carry out domestic and cross border instant payment transactions in all payment situations,” he said. “EU banks must become fully available for providing and receiving instant payments across the EU.”

Banks – and in particular small European institutions – are only beginning to gather knowledge around the topic, says Mazure. This will speed up given the changes that are expected over the next three years, he adds.

In July 2020, the limit for a Sepa credit transfer (SCT) instant transaction will increase from €15,000 to €100,000, according to Mazure this change could make “the liquidity issue a topic of discussion”.

The ECB is also expected to launch a new real-time gross settlement (RTGS) system by November 2021 to replace the existing Target2 system. And Swift announced at the start of November it was beginning to move EBA Clearing’s EURO1 payment system to the Iso 20022 standard which is expected to be completed by November 2021.

On December 3, SocGen announced the launch of an API which can be connected to a bank’s existing infrastructure to provide their clients with instant payments. The bank is working on building a solution for corporates and hopes to expand its reach in the future to international payments according to a spokesperson.

SocGen will have AML and fraud prevention checks run on the background of the API to fulfil its own regulatory obligations, a feature but the bank will not provide as a service. While integrating the API depends on the core banking of the bank and how its applications are built, Mazure says implementation can take between three to six months.

Tests are ongoing on the API’s connection to the European Banking Authority’s instant payment system, RT1. The spokesperson says the connection is expected to be ready by February. The bank is also looking to connect to the European Central Bank’s instant payment settlement system, Tips, before summer next year.

For Mazure, the bank has no other choice than to be connected to all of the systems.

“It is definitely a pity to be facing such complexity, but it is often the reality that we encounter in Europe, so we have to adapt. And maybe one day we will have more simple systems or schemes in front of us, but for the time being that is not the case.”

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