20 September 2016

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

An interview with Hays Littlejohn, EBA Clearing's CEO that focuses on the new European Payments Council (EPC) scheme, EBA Clearing’s solution, the success factors of SCT Inst, and what it might change for Clearing and Settlement Mechanisms (CSMs) providers in the coming years.

EBA Clearing contributed to the public consultation on the SCT Inst scheme, now closed. The EPC 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 EPC 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.

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

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 SCT Inst scheme a success is to put in place clearing and settlement solutions that address the risks for PSPs.

Can you tell us more about the main features of EBA Clearing’s clearing and settlement solution for SCT Inst 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 PSPs, which operate in all SEPA countries. A first version of the specifications has been made available to PSPs interested to join the service in the coming two years and their providers. We are pleased to see a growing community of PSPs showing interest in being part of the uptake of instant payments in SEPA.

Obviously we plan to update the specifications with the final version of the EPC SCT Inst 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.

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 SCT Inst scheme to evolve?

What we have learnt from stakeholders and interested PSPs 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.

Full interview

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