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EPC chair: Journey to pan-European euro instant payments begins

21 November 2017

The SCT Inst scheme is operational, says Javier Santamaría, Chair of the European Payments Council (EPC), in this overview of the uptake so far, likely impacts and migration challenges.

The single euro payments area (SEPA) instant credit transfer (SCT Inst) scheme went live today on 21 November. Nearly 600 payment service providers (PSPs) across eight European countries are already participating in this new EPC-designed voluntary scheme to make instant payments a reality in European citizens’ and businesses’ lives.

It is intended to reach the 34 SEPA Countries in Europe from Austria to Italy, Poland to France, as the scheme rolls out and uptake grows in future years.

Instantaneous operation is everywhere in our daily lives, and is now part of the European payment scene too. SCT Inst gives its users the ability to:

  • Move up to 15,000 euros from one account in Europe to another
  • Maximum of ten seconds allowed.

These key requirements, and the constant 24×7 operational basis of SCT Inst, might have seemed a straightforward task to many European citizens, but it hasn’t been an easy project. There were many migration challenges along the way to reach this launch point.

Several countries had plans to develop their own national instant payment solution but the creation and key feature of a pan-European scheme had to involve a consensus between these various PSP communities. Cross-border operation, interoperability and reachability have been part of the debate.

The second challenge has been in regard to the speed of the scheme’s implementation. The inception of pan-European instant credit transfers has been rapid: remember, just two years have elapsed since the emergence of the debate about the need for an instant payment scheme for euro payments and the first SCT Inst transactions actually going live.

The entire payment industry has been extremely quick to move on this topic – a critical factor given that PSPs had to implement significant investments to be ready for the 21 November 2017 ‘go live’ today. PSPs have faced changes in IT, risk management, operations and marketing to be ready.

We are still just at the beginning of this journey towards instant payments. What remains to be achieved if instant euro credit transfers are to become a reality in all of our lives?

Infrastructure solutions
The SCT Inst scheme operates independently of any underlying technology and specific clearing and settlement solutions. Instead, these are chosen by the PSPs. Many infrastructure solutions are already in place and I expect more to come on stream. Compliant clearing and settlement mechanisms (CSMs) that have self-declared their adherence to the new SCT Inst scheme can be seen by clicking on the highlighted text.

Nine CSMs are already compliant with SCT Inst, including the largest ones across the continent, so there are plenty of services for PSPs willing to join SCT Inst.

More solutions will be proposed in the coming months, including the European Central Bank’s TARGET Instant Payment Settlement (TIPS). This will ensure an even greater reach for the SCT Inst scheme

Uptake: 15% of PSPs on board so far
Despite the fact that PSPs only had a brief one-year window to get ready for SCT Inst they have done remarkably well. Fifteen percent of European PSPs are already on board and offering SCT Inst services. I believe this is a good omen for the future of SCT Inst at this start point.

The 585 PSPs [mainly banks -Ed] who currently offer SCT Inst services are located in eight countries:

  • Austria, Estonia, Germany, Italy,
  • & Latvia, Lithuania, the Netherlands and Spain.

While it is possible for them to act either in the role of originator and beneficiary of SCT Inst transactions or as beneficiary only, we were pleased to discover that an overwhelming majority of compliant PSPs – 91% – act as both originator and receivers of SCT Inst transactions on behalf of their customers.

A quarter of PSPs on-board mid-2018 onwards
The EPC expects further PSPs in Belgium, Finland, Germany, Malta, the Netherlands, Portugal and Sweden to join the scheme in the course of 2018, taking participant levels up to around a quarter of all the PSPs in Europe.

In July 2018 we will pass an important threshold as a growing number of PSPs from Germany, the largest euro country, start to offer SCT Inst services. This moment next summer will take the total number of PSPs in the scheme above the 1,000 mark, equating to 25% of all European PSPs.

We hope that over 50% of European PSPs will actively participate in the scheme by the end of 2019, with most if not all of the 34 SEPA countries in Europe in the game by 2020.

The on-going implementation of SCT Inst across Europe will be progressive and diverse both between and within countries. Some PSPs remain in the starting blocks, while others finalise their plans. Existing payment habits and norms will lead to a heterogeneous, multifaceted pattern of SCT Inst adoption. This is because some countries already make greater use of credit transfers for daily payments, while others have different preferred instruments like cards.

Continuous adaptation: Maximum limit to rise?  
The SCT Inst scheme is not set in stone – quite the contrary – it will continuously adapt to meet market needs and is designed to do so. The first possible change to the parameters of the scheme is likely to involve a rise in the maximum EUR15,000 per transaction limit.

We are aware that with this limit the scheme will mostly be used by consumers at the outset. However, the EPC will review this maximum amount at least once a year, beginning in November 2018. An increased maximum amount would make SCT Inst especially attractive to corporates and is a possibility in the future once the operational basis of the scheme has been proven.

In addition, our regular EPC change management cycle, which applies to all SEPA payment scheme rulebooks not just the SCT Inst scheme, will roll out in 2018. A public consultation on SCT Inst will be launched around next April as part of this wider exercise. See the EPC website for details.

All stakeholders are invited to have their say on the future of the SCT Inst scheme either by addressing change requests by 31 December 2017 and/or by participating in the 2018 public consultation.

This review exercise will lead to the publication of an updated SCT Inst scheme version in November 2018, to take effect one year later in 2019. It is important for the EPC that the scheme reflects the latest technological developments and customer needs, so consultation and continuous adaption will be a key element going forwards.

One of the key success metrics for SCT Inst will be reachability, in other words how easy is it to make euro payments across all the borders of the 34 participating SEPA countries?

In my opinion, instant payments are in the spirit of the times, and we can trust the payment industry to embrace them enthusiastically. The higher the participation, the broader their reach, so I expect the scheme to develop well.

I do want to stress in my conclusion that adherence to SCT Inst is optional. However, I don’t believe that the rapid and broad adoption of the scheme will face any significant hurdles as it begins its rollout now.

Citizens and businesses will certainly use SCT Inst for national transactions, but a truly pan-European SCT Inst scheme will also be highly convenient for users as they will be able to carry out real-time cross-border transactions with friends and partners in an integrating European environment. The drivers towards reachability are clear.

At a time when uncertainties loom over the future of payments, with many market, technological and regulatory changes to come, such as the EU Payment Services Directive (PSD)2 for instance, I believe that SCT Inst services are a new and effective way for PSPs to strengthen customer trust and satisfaction. I am excited that this project is now underway.


Author: Neil Ainger
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