Getting ready to make the first SEPA Instant Credit Transfers possible...

Getting ready to make the first SEPA Instant Credit Transfers possible in November 2017

15 September 16

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An Interview with Hays Littlejohn, Clearing's CEO

We continue our series of interviews about the upcoming Instant Credit Transfer ( ) scheme with key payment players, with a conversation with Hays Littlejohn, Clearing’s CEO. While the was running the public consultation on the scheme earlier this year, Clearing, a bank-owned provider of pan-European payment infrastructure solutions, was already providing a preview of its instant payment solution. The finalised version of the scheme rulebook, including some of the 350 comments received during the public consultation, will be published in November. It doesn’t cover, however, the infrastructure layer of instant credit transfers, as it is not in the scope of the ’s mission. It is however a crucial element to make transactions possible. This is why we wanted to ask a few questions to Hays Littlejohn, and hear his thoughts about the new scheme, Clearing’s solution, the success factors of , and what it might change for Clearing and Settlement Mechanisms (CSMs) providers in the coming years. In addition, you can find at the bottom of this interview the links to the previous interviews on the same topic with other key stakeholders that we published earlier this year.

  • Clearing contributed to the public consultation on the scheme, now closed. The will make all comments publicly available when the finalised scheme is published. Do you wish to already share with us the main comments you made? Are you satisfied with the proposed scheme?

Building a scheme that satisfies the needs of a large participant and stakeholder community within such a short timeframe is an ambitious exercise, which the has been dealing with very successfully. We appreciate the structured and transparent process they have in place for pulling off such major industry efforts and the possibilities it offers to market participants and stakeholders to contribute to the scheme development.

The scheme is well thought out and has been further improved through the feedback taken on board during the consultation phase. Our future users will be especially pleased about the flexibility it provides around the time-out messaging – by making the optional confirmation message flows part of our system specifications, we can significantly reduce key risks for our participants and help them ensure high levels of customer trust for the new instant payment products.

  • On the clearing and settlement layer of instant payments, what do you think are the key factors to make transactions a success?

Like many infrastructure projects, setting up a highly robust and performant payment system requires input and commitment from many stakeholders. At its very core, a payment system is about Payment Service Providers ( ) agreeing with other on the arrangements in the inter- domain for handling payment instruments governed by the scheme. 

Sound risk management backed by solid legal arrangements is a key element of these agreements and thus a major factor to the success of payment systems in general. This is of particular importance in the context of instant payments, where the immediate, irrevocable availability of funds is achieved within not much more than an eye blink. The risks between participants must be understood and properly mitigated by design, and not as an afterthought. We need to be sure there is settlement certainty in every situation. Intermediary risk between non-bank players should be fully mitigated in a way that is clearly spelled out, and inexpensive to set up and maintain.  Thus, one basic but not trivial requirement for making the scheme a success is to put in place clearing and settlement solutions that address the risks for .

Furthermore, it is important to understand how the scheme and the solutions supporting it will be used and how transactions will ramp up. “Instant” is unknown territory for . It is not clear in all countries how soon consumers will adopt instant payments, whether or when these will replace Credit Transfers, cash, cards, or other payments, or for which business needs. Some communities count on becoming the only payment scheme over time, for all needs, including Business to Business, Business to Customer and government payments. Others believe Person to Person is the only case for the near term, and still others see no case at all. All parties in the ecosystem need to work together and ensure that the solutions provided can manage any or all of these cases, end-to-end, robustly and at a fair price. This requires careful orchestration and coordination, at all levels. 

  • Can you tell us more about the main features of Clearing’s clearing and settlement solution for transactions, about which you have already made announcements? Will you be ready to provide instant clearing and settlement by November 2017?

Our solution is built to be pan-European from the ground up. We are well into the implementation with our large community of European , which operate in all countries. A first version of the specifications has been made available to interested to join the service in the coming two years and their providers. We are pleased to see a growing community of showing interest in being part of the uptake of instant payments in .

Obviously we plan to update the specifications with the final version of the scheme rulebook following its approval. While the starting point is to build a scheme-compliant system, our aim is to develop a solution that provides the necessary flexibility to meet evolving user and customer requirements both at a functional and technology level.

At the same time, we are striving to optimally support users of any size and with different strategies in joining the solution at their preferred pace.

Another strong focus of our development work is placed on making the system as liquidity-efficient as possible. To enable functional flexibility, we offer the set-up of “Closed User Groups” to users that would like to process transactions with features over or above the scheme.

  • In your view, what will be the main impact of instant payments on the European CSM industry?

Longer term, there could be fewer CSMs, more tightly linked, at least at a technical level. This isn’t likely to occur instantly, however, as there are still many local needs to be met and in many communities it is likely that existing payment arrangements, which may need more special handling, will continue to be used. 

  • In the long term, how would you like the scheme to evolve?

What we have learnt from stakeholders and interested so far is that there is a desire for shorter end-to-end execution times, and some communities are working towards seeing that enhancement implemented as from the time of the launch of the scheme.

At this stage, it is difficult to predict the future evolution of the scheme beyond the live date since any further requirements will very much depend on the use cases and usage patterns we will see emerge when instant payment services across Europe are ramping up. It will be important for the industry to keep up with evolving market needs and expectations and adapt the scheme, products and the underlying infrastructure accordingly.

Click on the below links to read the previous Blogs from key stakeholders, about the scheme.

Ensuring successful SCT Inst development: A CSM's perspective - Interview with Michael Steinbach, CEO of Equens

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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