The Single Euro Payments Area's (Sepa) instant credit transfer scheme (SCT Inst) went live on Tuesday, enabling payments to be made between European countries.
The first payment carried out was by UniCredit between Germany and Italy, taking just 2.5 seconds.
Although marking a milestone in the movement of instant payments, and the first time that an instant payment has been made in Germany, the transactions takes place between countries with the same payments framework and the same currency. This removes many of the most complex aspects of sending transactions between countries.
Even in this environment, there are measures in place to provide protections and impose limits, with the European Payments Council setting a cap of €15,000 per payment. There is a still a long way to go before payments are moving freely at high speed across borders and between currencies.
“Real-time platforms will undoubtedly promote volume, speed and efficiency, but at the same time people will be nervous in some quarters about security and the need to ensure the appropriate measures are in place – with payments flowing faster, there is less time for due diligence and compliance checks,” he says.
Still, the platforms now being used are the envy of many countries.
Australia’s New Payments Platform (NPP) is bringing the country in line with what is already possible in the UK and Singapore. Although originally scheduled for the second half of 2017, the payments system is now mooted to be launched around Australia Day, on January 26, 2018.
Anne Collard, head of payment capabilities and industry at ANZ, says the country has tried to push its capabilities further.
“By creating the new infrastructure, it is also an opportunity to help future proof the payments network," she says. "The platform has been developed for overlay services, developed by different providers, on an open architecture. It will allow multiple new product solutions to leverage the platform.”
NPP has an advantage from implementing additional levels of client data protection.
|Anne Collard, ANZ|
“NPP uses an alias addressing system, enabling customers to make a payment to, for example, a favoured phone number or email address rather than bank details we struggle to remember,” says Collard.
The ability to allow multiple platforms to connect to the network could help Australia to expand to the international real-time network in the longer term. Developments in Europe, meanwhile, have been implemented to prevent any fracturing of systems between neighbouring countries from taking place.
Explains Earthport's Uberoi: “There are currently a number of domestic schemes in place, although Sepa SCT Inst starts to bring broader solutions. The European Payments Council was anxious to avoid lots of different systems coming to market, so now their scheme has been launched, we could see more energy around pan-European offerings.”
While the banks finally look to make these updates, non-banks have been making international, cross-border payments for some time, and have been able to develop interoperable systems.
PayCommerce has developed a platform for international payments based on its domestic payments systems. The infrastructure has been designed to remove some of the uncertainty around the fluctuation of FX rates, as the faster they move, the more certain the sender can be of the rate that will be applied.
Earthport also carries out cross-border payments, most notably entering into partnership with Bank of America Merrill Lynch.
Banks are looking to boost the services they have by layering on top of existing systems to avoid falling further behind.
Gavin Maclean, head of cash management and payments at Lloyds Banking Group,says: “In countries with domestic real-time solutions, we are seeing regulation driving innovation specifically in the UK, through the Payment Systems Regulator and Payment Strategy Forum, new services including new direct access solutions, and overlay solutions such as Request to Pay are being built to support further domestic innovation.”
Request to Pay allows companies to collect a payment with the same speed and reliability of Faster Payments, calling the payment from an account in a way comparable to a direct debit. The changes being brought in by the second Payment Services Directive (PSD2) will in effect allow for this, without the need of developing a separate platform.
Further regulatory changes are likely to make the market even more competitive.
Uberoi says: “Given that real-time is a relatively new concept, the arrival of a more open banking landscape will give non-bank providers the opportunity to offer something that banks, hampered by legacy issues, cannot immediately provide.
"PSD2 is all about promoting an integrated market and one of its goals is to foster innovation. Real-time offers the chance for nimble fintechs to come up with solutions that challenge the market dynamic.”
The industry is pushing in the direction of international, real-time payments, but with all the challenges taken into account this is a big ambition.
LLoyds' Maclean says there are more modest ambitions that can be focused on first.
“Whilst global instant payment solutions are longer-term aspirations, in the medium term increasing the transparency of payment and FX charges (that the PSD2 regulation mandates), combined with the availability of payment status, through solutions such as Swift global payments innovation (gpi) will increase end-to-end payment visibility and support clients in trading globally.”
Having payments that can move across the different real-time networks is not likely any time soon, with so few countries yet able to provide these services on a domestic level.
Collard at ANZ says: “It is inevitable that with a growing number of these real-time solutions in place domestically that people will look at opportunities to create cross-border value. However, it's early days yet in creating critical mass.”