Since the launch of the SEPA Instant Credit Transfer Scheme (SCT Inst) in 2017, major European banks such as BNP Paribas have supported instant payments for domestic cases. Some of these banks, including BNP, have now enabled the cross-border feature of SCT Inst, allowing customers to send euro payments to another country within the Single Euro Payments Area (SEPA) zone, with the payment being credited to the beneficiary in a matter of seconds.
Initiatives for setting up real-time clearing platforms across Europe have been low key and local, and initially we have been looking at each European country to achieve local instant real-time euro payments between counterparties within the same country.
Some countries – such as Germany – have looked at this from a pan-European perspective, and this is now also the direction we’re taking by activating the cross-border feature of SCT Inst – according to Wim Grosemans, head of product management, payments and receivables at BNP Paribas, and Steven Lenaerts, head of product management Global Channels at BNP Paribas.
Our initiative shows that instant payments are now becoming regional. However, most of our clients have not necessarily been waiting for the ability to make instant payments. We do see a lot of practical use cases, but instant payment alone is not going to be a game-changer for corporates – it is the combination of instant payment with real-time treasury functionality that is what makes this an important evolution.
In this context, the deployment of application programming interface (API) for SCT Inst is a significant development. Geographical coverage is important, but the combination of instant connectivity and payments will offer a truly differentiating customer experience.
Of course, the discussion around API connectivity is far broader than instant payments, but it is through combining these two elements that corporates are able to derive value from instant payments.
There are cases of instant payments without API, but with corporate payments it is more about payments discipline – so when we combine instant payments with APIs it becomes a compelling proposition, because it offers the possibility to integrate payment processing directly into the business practice.
Instead of having a business system where the payment process is taken over by a third party, our approach reduces lead times, improves synchronization and removes the need for follow up between the various steps of the process.
Our first implementation of API for SCT Inst – with a French healthcare insurance fund – showed us the importance of not simply bolting real-time payment processes onto existing systems. It is necessary to take a step back and re-factor business processes in order to leverage the full benefits of instant payments and the digitization options it introduces.
For example, the insurance fund revamped its website so beneficiaries could initiate a claim online. Once a claim was introduced, it was automatically analysed by the insurer and validation resulted in real-time instant reimbursement of the client. The fund used an API so that the funds could be directly wired to the client.
The result was a significant increase in service levels. This was a major benefit for the insurance fund because it was able to totally revamp the way it handled claims.
Delivering API connectivity first and then moving onto more traditional connectivity options was a challenging approach, but the rationale was that it would produce a great deal more added value for our corporate customers.
Some level of automation is necessary to capture the real-time nature of the process because with online banking platforms for corporates there is typically some segregation of function, where a user will initiate the payment and there are one or more authorizations required before the payment can be released for processing.
There are also implications for corporates thinking about real-time treasury management. The traditional process was that a corporate looked at its liquidity position and took a number of financial decisions related to that, but now it would have a more timely view that could enable it to make a more informed decision.
Instant payment is a true evolution for banks that have been functioning in batch mode for decades. But offering instant payment on its own is not where the real potential is – it is what corporates can do with it and how it is used in new solutions that bring value to the client that makes it so exciting. It is a differentiator that presents an opportunity to transform corporate business models.
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