The Eurosystem recognising the need to increase the speed at which payments are processed, and as part of its role in promoting safe and efficient payments in the European Union, acts as a catalyst in the development of innovative payment solutions such as the instant payments in euro.
The Euro Retail Payments Board (ERPB) has defined instant payments as “electronic retail payment solutions available 24/7/365 and resulting in the immediate or close-to-immediate interbank clearing of the transaction and crediting of the payee’s account with confirmation to the payer (within seconds of payment initiation), irrespective of the underlying payment instrument used … and of the underlying arrangements for clearing … and settlement”.
Instant payments will dramatically increase the speed at which payments are made and received in euro in the European Union (EU). Although the existing electronic payment infrastructures enable payers to initiate retail payments at any time, it normally takes up to one business day for the payment to reach the beneficiary. Additionally, the need to reduce the time required for safe fund transfers has led Payment Service Providers (PSPs) and clearing /settlement infrastructures to develop national instant payment solutions.
In order to avoid fragmentation and to achieve a single and competitive market for retail payments in euro, the ERPB and the Eurosystem have developed initiatives to foster instant retail payments in euro. On the basis of the European approach, instant payment solutions should consist of layers: a scheme layer, a clearing layer and a settlement layer.
Instant payment scheme
In Europe, alongside national instant payment solutions, including mobile payments, the work towards a pan-European scheme for instant payments in euro has focused on the Single European Payments Area (SEPA). The design and implementation of the new scheme has required and ensured pan-European reachability and interoperability among PSPs.
Against this background and following the approval of the ERPB, the European Payments Council (EPC), representing PSPs, launched the SEPA Instant Credit Transfer scheme (SCTinst) and announced the beginning of PSPs’ voluntary SCTinst adherence process. On 30 November 2016, it also issued a set of rules, the SEPA Instant Credit Transfer Rulebook V.1.0, which will take effect on 21 November 2017.
The key characteristics of the SCTinst scheme are summarized in the infographic below:
The main difference between SCTinst payments and SEPA credit transfers (SCTs) is that the latter are bundled together and processed in bulk files that are submitted for intraday clearing and settlement, while SCTinst payments are processed and settled one-by-one, in real time, any hour of day, any day and within seconds (24/7/365).
Instant payment clearing infrastructures
In its catalyst function and in order to support the payments market, the Eurosystem has publicly and clearly announced its expectations regarding the requirements that instant payment clearing infrastructures have to fulfil so that they can support at least one pan-European instant payment solution in euro by November 2017 (ECB Press Release). The requirements set, in agreement with them, concern the common access policies of infrastructures vis-à-vis both PSPs and other infrastructures; harmonized technical and business interoperability in line with Regulation (EU) No 260/2012; and single risk mitigation model.
Instant payment settlement infrastructures
Meanwhile, the Eurosystem has taken the decision of developing and offering a pan-European settlement infrastructure for instant payments. The proposed TARGET Instant Payment Settlement service (TIPS) will enable the real-time settlement of instant payments in central bank money in parallel to TARGET2 as of November 2018.
The benefits of instant payments
Apart from being beneficial to users (payers and payees) due to 24/7/365 availability and immediate transfer of funds, instant payments offer a number of other benefits from the perspective of greater financial integration and the economic rationale for providers to offer instant payment solutions, as outlined below:
Payment and Settlement Systems Department
Funds Transfers and Infrastructure Study Section
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