Ensuring successful SCT Inst development: A CSM’s perspective

Ensuring successful SCT Inst development: A CSM’s perspective

29 June 16

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Interview with Michael Steinbach, CEO of Equens

With the public consultation on the ’s Instant Credit Transfer ( Inst) scheme closing on 10 July 2016, payment professionals are already in the process of defining the pan-European instant payment solutions they will propose to their customers. In this instance, the clearing and settlement mechanisms (CSM) are one of the aspects they will need to take into account. Whilst the Inst scheme focuses on the business and technical rules of instant credit transfers, actions under the responsibility of other parties, such as the clearing and settlement details, are expected to be carried out in parallel. To shed some light on the possible future CSM layer for Inst transactions, we asked Equens, one of the largest pan-European payment processors, to share its view on the proposed scheme. In this interview Michael Steinbach, Equens’ Chief Executive Officer, provides insightful information about the key success factors of the Inst scheme from a CSM’s perspective, the challenges it raises and its potential impact on the CSM industry.

  • ​Although the clearing and settlement layer of the proposed ’s Inst scheme is left out of the rulebook (as it is not in the scope of the ), it is a critical element to make pan-European instant credit transfers a reality by 2017. What are the key success factors in the clearing and settlement area to support an effective launch and fruitful development of Inst across Europe? 

Equens believes that achieving interoperability is a key element in the clearing and settlement area for making pan-European instant payments a success. Therefore we see the following as the key success factors to support an effective launch of Inst across Europe by 2017:

  • A common access policy, whereby all infrastructures would be open to interoperability and ’s only have to connect to one infrastructure of their choice in order to have full European reach;
  • Common standards to ensure CSMs are able to connect to each other (Inter-CSM connections) and share their reach;
  • A harmonised implementation of Inst processing on the infrastructure level;
  • A single model for risk management combined with a single procedure for settlement of pan-European instant payments in TARGET2.
  • ​What will the main challenges be for Equens in order to be ready to offer to its customers clearing/processing services for Inst transactions, by November 2017?

Generally speaking, one of the main challenges for timely delivery lies in the settlement area, due to late availability of functional specifications for the new instant payments settlement procedure as defined by TARGET2. As Equens started its Instant Payments project in April 2014 and therefore is well underway with the development and testing activities, its clearing and settlement services will be delivered to the market by November 2017. 

  • What will be the main impact of instant payments on the European CSM industry?

Equens expects that a further consolidation in the European CSM industry would be a natural consequence of the introduction of the new instant payments scheme, mainly driven by the strategic agenda and investment choices. Equens believes instant payments to be the 'new normal' with a potentially huge scope. Above all, this development would act as a catalyst for increased competition and more innovation in the CSM area.

  • Are you satisfied with the proposed scheme?

Equens appreciates the key principles on which the scheme is developed, e.g. 4-corner model, the re-use of the rulebook and implementation guidelines, the obligation on the originator bank to provide settlement certainty for every successful Inst transaction. At the same time we recognise that the current text of the rulebook has a few white spots that leave room for interpretation, especially in non-happy flows. Therefore some additional clarification on these would be desirable in the final text of the rulebook.   

  • Does Equens plan to participate in the public consultation on the draft Inst rulebook? Are there particular aspects you plan to comment on?

Yes, Equens is planning to comment on the draft Inst rulebook. In general, key points Equens would like to raise are aimed at achieving interoperability and a harmonised end-user experience with instant payments in the zone. For example: 

  • Standard rules (and messages) to indicate ’s temporary unavailability (e.g. for maintenance);
  • A process for instant / seamless switch to a new rulebook version, without interruption of the service, particularly when the new rulebook has conflicting rules with the previous version;
  • Inclusion of a settlement reference in the payment message/confirmation for easier reconciliation by .
  • In the long run, how would you like the Inst scheme to evolve?

Similarly to the and schemes, the Inst scheme naturally would need to be adapted to the market requirements and further harmonisation of local solutions across Europe. For example, it would need to cater for future adoption of instant payments by corporate clients, new use cases and growing expectations of the consumers.

This interview with Michael Steinbach closes a series of Blogs about the Inst scheme, in which key stakeholders shared their point of view on the Inst scheme. Previous Blogs are available on the below links.

The view of Swedish instant payment players on the SCT Inst scheme

Reflections on the progress towards pan-European instant payments in euro - interview with Helmut Wacket (European Central Bank)

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