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SCT Inst & Belgium: An ING instant payments overview

10/04/2018

In this overview of the Belgian market and its readiness for Europe’s SCT Inst instant payments scheme Begoña Blanco Sánchez, Head of Payments, ING Belgium, explains the country’s collective target of 85% reachability for beneficiary banks by November 2018; decision to work with the STET CSM; and local variations of 5-second delivery, no maximum limit and so on, while looking at the bank’s own adoption programme.

Instant payment (IP) adoption in Belgium is a joint project at interbank, which is otherwise known as the Belgian Interbank Standards Association. The network and its collective white-label payment initiation software and connectivity options increase efficiency by providing standardised online banking and processing services. The economies-of-scale savings it offers on 300m transactions are worth EUR1500bn a year. Almost as importantly, the organisation acts as a unifying force for Belgian banks to act collaboratively. A new code for instant payments in Belgium is expected to be forthcoming from Interbank.

ING Belgium has built a basic instant payments offer in accordance with the European Payments Council (EPC) scheme rulebook. Together with other Belgian banks, under the auspices of Interbank, we are preparing for a collective national ‘go live’ in the country in November 2018 when major banks will move. Smaller banks will follow on the next year and into 2020.

Moreover, all Belgian banks have agreed to work with STET, one of the major European clearing and settlement mechanisms (CSMs), as well as organisationally via Interbank to ensure national ubiquity.

We signed the service contract with STET in the fourth quarter of 2017 and all the major banks in Belgium, including ING, made a commitment to launch Instant payments collectively in November 2018. Banks themselves can compete in the overlay services layer.

[Ed. Note: The only Belgian bank officially recognised as SCT Inst-compliant by the EPC Register of Participants up until Q1 2018 was EPBF which is a subsidiary of the French bank BRED Banque Populaire. Vulume in the country will migrate en masse with the STET service in November].

Big Belgian banks to offer instant payments in Nov 2018
Our national plans prompt the question: why have Belgian banks committed to launch instant payments in November 2018, when the SCT Inst scheme has already been live since 21 November 2017?

The answer is that our main objective in Belgium is the reachability of beneficiary banks. That is our aim. We want banks to be able to receive and execute instant payments easily, as we believe this is crucial to making them a success. In Belgium there is a reachability tagret of at least 85%. We are committed to offering instant payments in the peer-to-peer (P2P) space in one channel, while other offers are left to the commercial space and to competitive forces.

Local variation in Belgium
Belgian banks have agreed to execute instant payments within five seconds, whereas elsewhere in Europe the SCT Inst-compliant instant payments offer will be available as a payment that is executed within 10 seconds. This is the EPC-mandated rulebook parameter for the single euro payments area (SEPA) instant credit transfer (SCT Inst) scheme. Some nations, inlcuding Begium, have decided to exceed the minimum requirements.

Moreover, Belgian banks are also not applying a maximum amount for instant payments in our local market, so the SCT Inst maximum of EUR 15,000 will not apply domestically. A maximum amount of 15,000 euro will still be applied cross-border where SCT Inst-compliant payments are made into another country elsewhere in the 34 SEPA nations.

The reason why Belgian banks have collectively made these particular agreements is that we want to cover different use cases and decrease the national use of cheques and cash by launching instant payments as widely as possible.

The testing phase for our plans in Belgium began in January 2018 and the project is progressing well, ahead of the November 2018 collective big bank migration.

ING adoption & customer impacts
We at ING will move collectively with the vast majority of the rest of the volume providers in the country in November, but in common with other banks, we have several challenges to overcome first, such as:

  • A need to adapt our internal ING Belgium IT applications, as some are not necessarily able to offer 24-hour, 7 day a week operational support, as SCT Inst requires for its ‘always-on’ operational mandate. No downtime is allowed, so batch processing has to become a thing of the past.
  • The European TARGET2 real-time gross settlement (RTGS) system is not open on a 24×7 basis, so we need to prefund the transactions during closure hours, predict amounts needed, and then adapt our processes accordingly to be initially ready.
  • ING Belgium’s operational department, compliance and anti-fraud unit will all be impacted internally, so we will need to adapt internally to be able to support instant payments.

The corporate and small business customers of ING Belgium, and other banks, will also be impacted. They will:

  • Probably need to prepare for a change in their software tool and connectivity.
  • At interbank, of which ING Belgium is a member, we foresee a new code for instant payments in the country. It will impact the reporting and payments will continuously be credited in customer accounts. Therefore, it will have an impact on their cash management and their accountancy procedures. This is something they should prepare for.

As a bank, ING and other institutions need to think about how we can help. We need to prepare good communication and education to support businesses, and indeed ordinary consumers, as they move into a real-time, instant payment world.

The advent of European instant payments will bring value to the payment world and tremendous opportunities. For example:

  • Business customers will not have to deal with cut off times anymore.
  • Merchants in electronic e-commerce areas will receive flows during weekends, whereas before they had to wait until the next target day. Instant payments will also bring more efficiency into their internal cash management and logistics.
  • Wages can be paid faster. This is particularly useful in some sectors where they need to pay workers once a day or several times during the day.

Instant payments can also be extended to other businesses as lending, for example, or as an insurance mechanism to engender trust.

The instant payment is the ultimate next evolutionary step of the older non-fast SEPA Credit Transfer (SCT) instrument that we know today, offering better speed, efficiency and constant availability. In the coming months and years, instant payment will be extended throughout Europe as the voluntary SCT Inst scheme rolls out. It offers another concrete step of in the process of European harmonisation and will contribute significantly towards it.

 

 

Author: Neil Ainger