INSTANT PAYMENTS. The right time to share investments.

Transcription

1 INSTANT PAYMENTS The right time to share investments.

2 INSTANT PAYMENTS: THE RIGHT TIME TO SHARE INVESTMENTS. European authorities have seen instant payments as being essential to support the Digital Single Market initiative, which aims to give all European citizens access to digital services and to enable European companies to position themselves better in the global economy. In 2014, this led the ERPB (Euro Retail Payment Board) to name the implementation of European instant payment solutions as one of the objectives of its SEPA 2.0 work plan. 2 Instant Payment is a 24/7/365 electronic payment solution paving the way for instantaneous interbank clearing and crediting of the beneficiary. Although Instant Payments could be supported by a number of different payment instruments, the ERPB has mandated the EPC (European Payments Council) to design a pan-european system of instant payments in euros based on SEPA Credit Transfers.

3 THE EUROPEAN AUTHORITIES GOALS To modernise payment systems and bring the European Union up to the level of other regions To avoid the fragmentation of European markets after SEPA harmonisation To regain sovereignty with a European payment scheme in response to the international card schemes. USE CASES At present, it may seem difficult to imagine the future use cases associated with Instant Payment. They do, however, cover all types of payment. Here are just a few: P2P: prize pools, shared expenses, face-to-face sales between individuals or on a free ads site C2B: online payment (e-commerce), in-store payment (especially for high-value purchases), payment of invoices B2C: refunds, commercial goodwill B2B: payment on delivery, just in time payment. The United Kingdom is an interesting case in point: ten years after its launch, it is apparent that not all the possible use cases for Faster Payment had been considered at the outset. And the ceiling was raised at the beginning of the year to GBP 250,000 to enable payments of large amounts between companies. 3

4 The implementation of the second Payment Services Directive (PSD2) is a factor which facilitates the deployment of Instant Payment: by forcing banks to provide access to third parties for initiating payments, it increases the number of cases where via the intermediary of a third party, the payee is the one particularly in the case of traders who can trigger the immediate payment from the bank of the payer (their customer). Instant Payments success will depend on how well they correspond to the customer experience and the means of identification and authentication that will be offered. An examination of these use cases clearly shows that in some areas, Instant Payments are a viable competitor for cash and card payments. Card payments developed with the help of a balanced economic model including a commission scheme that finances the whole system. Today the amount of these commissions is being challenged by regulations and provisions such as MIF (multilateral interchange fees) but new, alternative payment methods could also pose a threat. 4

5 INVESTMENTS REQUIRED TO CREATE THE PAYMENT SYSTEMS OF THE FUTURE Furthermore, the roll out of Instant Payment will require significant investment and operating expenses. Before starting to consider possible ways to respond to this challenge, it is worth examining two provisions that remain unnoticed in the SCT Inst scheme: the ordering parties ability to issue mass Instant Payment orders and to submit Instant Payments to be executed on a future date. With these two provisions, Instant Payment could eventually replace the other forms of transfers. The CSMs have understood this, shifting mass compensation systems towards individual processing in real time. Instant Payment will undoubtedly have to undergo introduction and adoption phases, but because it can take the place of ordinary credit transfers and card payments in some cases, it will ultimately become a mass payment method. The challenge today, then, is to build the payment systems of tomorrow: not only will they have to function in real time, they will also need to be able to handle large volumes. Several approaches are possible. Some will favour a single technological leap, while others will prefer a stepby-step transformation capable of keeping pace with the increase in load while ensuring the completeness of the processing chain. In any event, over the next 5 years, payment system architectures will have to evolve: they will be real-time oriented and based on APIs and microservices, enabling them to support high availability, high resilience and high scalability. Consequently, significant investment by banks will be required. If they wish to avoid losing their competitive advantages and to withstand new competitors by expanding the range of services they plan to distribute to their customers while adding value, they will need to lower processing costs. This means they have a strong interest in pooling their functions as producers, sharing both investment expenditures and operating costs. 5

6 A SHARED PAYMENT PLATFORM BETWEEN BANKS For this reason, the Transactis joint venture (see focus) will be offering an Instant Payment solution in 2018 based on its shared payment platform created in partnership with Sopra Banking Software. Drawing on its experience with Société Générale (SG) and La Banque Postale, and as an expert in high-volume payments and real-time processing, Transactis decided to extend its offering to include Instant Payments processing for banks, enabling them to concentrate on implementing their own bank offering strategy. By choosing to build on its robust and proven multi-bank payment platform, which has been processing millions of transactions every day since 2009, Transactis is thus providing a gateway to the European market and the mass roll-out of Instant Payments (scalability, synergy and an interface with other offers of payment, mass processing, etc.). TRANSACTIS INSTANT PAYMENTS SOLUTION The Instant Payments solution to be offered by Transactis from 2018 will take these two forms: An Exchanges offering, providing instant access to the various European exchange and settlement systems in euros (STET, ABE Clearing and ECB), via a highly resilient mechanism, regardless of whether the bank handles its own transactions or uses the intermediary of a direct participant. In this way, from 2018, Transactis can offer all banks a simplified solution to the issue of connecting to European systems, whether in the administration and monitoring of these exchanges, or in the implementation of the required physical equipment (STEBOX and ABE Clearing equivalents or TIPS, network connectivity, etc.). 6 A complete Processing and Exchanges offering providing complete order handling and processing right up to the exchange systems. Transactis will offer a direct interface to the bank s mobile or Internet applications (API, Web Service), optional services (Anti- Fraud, Names and Addresses Compliance, etc.), as well as a strong integration ability with a high level of variability for the bank (account control, provision control, funds reservation, etc.). Additional output and supervision services will be provided, allowing each bank to carry out its own operational monitoring.

7 TRANSACTIS, is a joint venture between Société Générale (SG) and La Banque Postale (LBP) created in 2008 and based on a Card Processing Platform is a success as an industrial IT operator, processing 4.5 billion transactions in 2016, or 22% of the French market. It has brought a significant decrease in individual transaction costs and the sharing of IT investment for draft regulations and new banking requirements. TRANSACTIS aims to become the leading multi-bank payment platform of a significant size in Europe: 2.8 billion transfer-debit transactions/ year operated today, 25% of French volumes and 6% of Eurozone volumes. After SEPA Migration, Transactis is transforming itself to prepare for opening up to the European market: Société Générale, La Banque Postale and Sopra Banking Software teamed up to develop a shared payment platform : Thanks to its mutualised development and production offerings, Transactis provides an answer to the investment problems banks face with new payment products. Transactis offers banks the opportunity to respond to the challenge of Instant Payments and to play a greater, more innovative role in the European market. providing its strong expertise in the banking sector having the ability to anticipate market needs through its shareholding banks and its industrial partner Sopra Banking Software. guaranteeing a sustainable offering with its banking shareholder base providing a payment offer covering the entire value chain (from channels to exchange systems), and comprehensive and international SEPA service, across all market segments facilitating future convergence between cards and other payments, as Transactis handles both. Built on Sopra Banking software, the Transactis platform is naturally structured to facilitate the integration of new clients.

8 Bernard RAMÉ Business Line Manager Payments & Cards Sopra Banking Software Philippe TARANCHON Head of Instant Payments offering TRANSACTIS CONTACT : info@soprabanking.com