IBS Journal June 2016
25
standard it relies on.
Australia’s new system is designed to be more integrated. Its payment messaging and settlement will be aligned to give a really fast ‘real-time’ solution due to the newer technology that SWIFT will design, implement and operate. The UK was a pioneer in this field when its FPS was launched in 2008 but its solution is best described as near real-time. It will require an upgrade in future years to match some of the newer systems coming on stream.
The definition of ‘fast’ in faster payment solutions depends upon what back-end platforms each nation is using or designing. But a payment certainly has to be processed in seconds and settled in near real-time in order to qualify and to be able to compete with speedy non-bank technology solutions. The US, for instance, is to gain a new same day payment platform this year from NACHA but in reality it will have to wait until 2017 for a truly ‘real-time’ immediate system when The Clearing House (TCH) privately-owned entity, which is controlled by banks and processes 50% of automated clearing house (ACH) volume in the US, will launch a modern nationwide platform in cooperation with VocaLink, FIS and other technology processing firms, under the auspices of the US Federal Reserve Bank.
TCH’s platform will provide some needed ubiquity in the fractured US payment landscape as it will be accessible by all the tens of thousands of financial institutions (FIs) in the US. It will integrate with current accounts so customers can use their existing FI accounts to make instant payments, plus it will support complex business payment services including electronic invoicing, rich remittance data and confirmation of delivery. Specifications have been published to allow banks and suppliers to start their connectivity work. Testing is planned for late this year, ahead of ‘go live’ next year.
The European Central Bank (ECB) is pushing for a euroland real-time payments infrastructure in Europe, under the auspices of the European Payments Council (EPC) and the oversight of the Euro Retail Payments Board (ERPB). The platform will initially have a 10 second settlement timeframe and EUR15,000 maximum payment limit. The Single Euro Payments Area (SEPA) Instant Credit Transfer (SCT Inst) scheme draft rulebook is due to finalised in November 2016 and the proposed ‘go live’ date is late 2017. The optional scheme will have 24/7/365 availability and is expected to use ISO 20022 messaging as an aid to interoperability.
However, it must be stressed that all this is merely in the planning stage and the final details and start date may differ – at the very least its implementation on a country- by-country basis is likely to vary. As with the long-running SEPA harmonisation project there are likely to be many arguments about how different national payment schemes in Europe or collective bank offerings can be grafted on to the SCT Inst framework to suit each communities’ needs.
“The benefits of extra speed; 24x7 service; irrevocability; and so forth, which are common to all real-time platforms, will be present in Europe but how we get there is up for debate,” says Francis De Roeck, Head of Payments, BNP Paribas. “Some may not use the ISO 20022 messaging defined by the ECB/EPC and politicians, instead relying on the old ISO 8583 card standard to achieve real-time payments. It is up to the user communities themselves to work out what they want to do within the parameters being finalised. Each must decide what systems they want to build afresh and what bits they want to reuse for a new instant payment purpose, based upon their investment budget, future innovation plans and so on.”
National end use cases in the EU could, however, lead to fragmentation and a need for multiple ‘connecting’ solutions for large multinational banks. This isn’t what the ECB wants and could ultimately mean extra expense and an inability to compete effectively with more nimble, cheaper to run ‘greenfield’ technology solutions. Crucially, it would make it harder for more forward- looking banks to use real-time infrastructures as the platforms for innovation that they should be.
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