04 October 2016
SCT INST scheme to help instant payments become ‘the new normal’
Instant payments are taking an ever increasing share of the payments market across Europe, with successful schemes in the UK, Sweden, Poland and Denmark. Major benefits, including new functionality, speed and 24/7 availability, are not only highly attractive in peer-to-peer payments but also in P2B, B2P and B2B use cases.
The SCTINST scheme is scheduled to be ready for first live adoption by November 2017. It may be non-mandatory, but because it’s based on ISO20022 and the original SEPA Credit Transfer (SCT), it’s compatible in data terms with existing SEPA cases, making the migration process easier. So, as well as creating new volumes, instant payments will also grow by attracting volumes from the existing SCT and SEPA Direct Debit (SDD) payments instruments, card payments and elsewhere.
SCTINST is designed for Pan-European availability. For launch this won’t initially be the case, but for the longer term it’s important due to the rising number of consumers shopping abroad online. Instant payments provide cleaner handoffs between the Third Party Payments Service Provider (TPP) and the Account Servicing Payments Service Provider (ASPSP), which is likely to create further appetite for SCTINST when the PSD2 regulation comes into effect.
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Instant payments also make sense economically. The increased value offered to users will enable higher fees where services are chargeable. For example, PSPs in the UK have been able to charge premium fees for faster payments, and businesses have accepted this if they deem the instant nature of payments to be important to their business.
Although the nature of instant payments does bring a significant risk: any interruption to the ‘always on’ service will be visible and unacceptable to users in the real world and consumer complaints will be amplified through social media more loudly and quickly than ever before.
A key enabler for instant payments will be technology vendors’ ability to provide PSPs with real-time payment platforms resilient enough to handle the 24/7 availability and high volumes with built-in scalability equivalent to or greater than all existing ACH volumes. This will require a new central infrastructure, as instant payments have fundamentally different requirements to those designed for batch or asynchronous systems.
Promotion of SCTINST will be another key factor in the adoption of instant payments. For example, the term ‘Faster Payments’ has become a trademark in the UK, and through time has created understanding and demand amongst consumers and businesses. In Sweden, common branding amongst PSPs and active promotion through the media has seen impressive uptake.
The end customer technology for P2P or P2C payments is easy, and may only require them to download an app from their PSP. For corporate users to fully benefit from the automation of payment processing and elimination of post-event reconciliation they will need to adapt their core processes.
We believe the impact of instant payments will be the platform for a much wider replacement of existing SEPA instruments over time and will soon be the new normal. To find out more about the future of payments, visit vocalink.com.