In November 2016, just two years after the Euro Retail Payments Board (a high-level body chaired by the European Central Bank to address strategic retail payment issues) identified the need for a pan-European euro instant payment solution, the EPC published the SEPA Instant Credit Transfer scheme. It was launched on 21 November 2017, a world first for a region as large as SEPA.
Eager to find out more about this initiative, we have contacted Javier Santamaría for an interview and he was kind enough to walk us through all the particularities and benefits that SEPA Instant Credit Transfers will bring to the European payments landscape. We hope that you enjoy the interview bellow as much as we did!
What are the key features of the SEPA Instant Credit Transfer scheme?
The most relevant one, also mentioned in the name, is immediacy – the funds will be available in less than ten seconds after the transfer has been initiated. Another important feature is that the scheme will be open and accessible to users and service providers 24 hours a day, 7 days a week. These two main features, immediacy and accessibility, are the ones that best describe the scheme.
Although there are other schemes for instant payments , what makes SEPA Instant Credit Transfer different is the potential scope of its reach, which includes 34 European countries. The scheme is also embraced at a European Union level. It is also important to note that although the transaction has to be in EUR, the payments accounts held at PSPs operating within the scheme do not have to be denominated in EUR. This means that instant payments can be made between two accounts, in the SEPA region, denominated in different currencies.
...payments accounts held at PSPs operating within the scheme do not have to be denominated in EUR
These features, immediacy, availability and geographical scope, make the SEPA instant credit transfers scheme a very unique one. Furthermore, as it has only a few limitations, it can be used with different purposes for any kind of segment and service. Actually, the only limitation is the maximum EUR 15,000 transfer amount. However, this will be just in the beginning, as the maximum amount of funds that can be transferred will be analysed and if necessary, increased overtime. We will review the amount limit in the first year and, based on the market, we will increase this limit to a higher amount.
What will be the pace of implementation across Europe? Are there any examples of use cases?
Any bank or PSP can adhere to this scheme. Initially, the SEPA Instant Credit Transfer scheme will be implemented in eight European countries: Austria, Estonia, Germany, Italy, Latvia, Estonia, Netherlands and Spain. PSPs from Finland will also be ready in 2018 along with PSPs from Belgium, Malta, Portugal and Sweden.
More German PSPs will start proposing SCT Inst services in July 2018 and there will be 1000 participant banks. This means that the scheme will be proactive, aiming to include a wider geographical range and a larger number of PSPs and banks so that by the end of 2020, we hope, the scheme would have reached a critical mass. Currently, we are happy with the initial 8 countries and 600 adherent participant banks.
It is important to supervise the scheme’s evolution, as there may be some difficulties ahead, but, for the time being, we are very optimistic. The initiative has been welcomed by many banking communities, which will deploy their payments solutions to the market, making these functionalities available to users. All in all, we will judge the scheme’s success on how it benefits the end-user.
the scheme is suitable for any environment, be it P2P, B2B, mobile payments
Coming to use cases, as expected, in the beginning the number is limited, but with as time goes by, we expect to see multiple implementations. Especially since the scheme is suitable for any environment, be it P2P, B2B, mobile payments etc. It has no limitations in function and scope, and more and more use cases will become available in time. An important one can be anticipated in the P2P environment where, payments will be sent, between users, via a mobile interface.
It looks like everyone stands to win from instant payments, but are there any parties that stand to lose?
Overall, for the payments space, I would say that this is a win-win situation because the SEPA Instant Credit Transfer scheme is a gain in efficiency. The main aim of this scheme is to replace cash and cheque transactions and on that end, I would say that instant payments will benefit everybody, especially the end-user, who has the option to use instant payments, or not.
However, if you look into the supply side, the situation is a little different because service providers have to invest upfront to implement instant payments. Afterwards, they have to compete on the market to get a return on that investment. In this area, in spite of the scheme being beneficial for everybody, we will see some differences. Some service providers will be able to gain a better return of investment, and will be more successful in their implementation than others. Like in any competitive environment, there will be differences and while some will be better off, it is important to highlight that everyone stands to gain. It is just that some will gain a bit more.
Will instant payments drive banks to innovate? Can you develop more on the link/relation between PSD2, Open Banking and the Instant Credit Transfer scheme?
There is certainly a coincidence in timing. There is no strict linking between instant payments and the opening of access to account, which is the main subject of PSD2. But if you look more carefully, both efforts have a common objective, which is that of creating an unbroken integrated single European market.
In this sense, they work in parallel and support each other. Instant payments coupled with access to account will allow new providers to develop new solutions. On the other hand, as opening the access to account becomes a reality, we will see new functionalities and services made possible by the instant credit transfer scheme. Instant payments will add new value to PSD2 by allowing providers to develop new products.
..they work in parallel and support each other...
Both PSD2 and the SEPA Instant Credit Transfer scheme resonate with each other and this mutual support can develop new benefits. Therefore, the coincidence is not only in time. There are some goals which are shared: that of the construction of the single payments market in Europe and, in that sense, they can be seen as something working in parallel.
How can corporates and businesses benefit from instant payments?
In terms of payments functionalities and reach, corporates have probably more requirements than individuals do, and their demand for instant payments may be lower because they have alternatives. But I think that it would also become beneficial for them to have this easy-to-use scheme for their businesses.
Of course, for a purely B2B environment, the limitation of EUR 15,000 could become an obstacle and that is why we are watching it very closely and, if necessary, we will increase that amount. However, for many purposes, having an instant payments functionality, is something valuable and beneficial and I’m sure corporates and businesses will benefit from it as well.
The immediacy and availability of funds as well as the all-around 24/7 openness will make instant payments useful for corporates. These functionalities are not present in most of the alternatives that they have at hand. A use case for instant payments in the B2B environment could appear in the gig economy, where corporates could use the instant credit transfer scheme to pay labourers.
What is, in your opinion, the most radical change that instant payments will bring to the European payments landscape?
It will not be a quantitative impact, but a qualitative one. The perception that banks are really becoming real-time businesses will be more important than the quantitative impact. At this time, any forecast beyond that will, probably, fall short.
I can see that, in the future, developers will bring solutions we cannot imagine now, solutions that will generalize and exploit the value of instant payments. I am sure that we will witness innovation and the development of new services. The SEPA Instant Credit Transfer scheme is providing the pieces with which, just like in a Lego game, you can build whatever you want. I think that this proactive quality and openness make the scheme truly unique and exciting.
About Javier Santamaría
Javier Santamaría is the Chair the EPC since June 2012, and has been one of its members since its creation in 2002. As an independent, self- employed professional, Mr Santamaría has accumulated broad and balanced expertise in the intertwined dimensions of payments – business-related, operational, technical – across different client segments and product lines, in the legacy and the innovative spheres. He has been immersed in both cooperative and competitive environments. Besides payments, he is interested in other banking fields and continues to be actively engaged in academic matters. Mr Santamaría is also Chair of the Iberpay Board.
About The European Payments Council (EPC)
The European Payments Council (EPC), representing payment service providers, supports and promotes European payments integration and development, notably the Single Euro Payments Area (SEPA). The EPC is committed to contributing to safe, reliable, efficient, convenient, economically balanced and sustainable payments that meet the needs of payment service users and support the goals of competitiveness and innovation in an integrated European economy. It manages four SEPA payment schemes for direct debits and credit transfers.
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