8 November 2017

Reaping the rewards of instant payments takes work

The key benefits of the instant payment systems being rolled out in Australia and in Europe were discussed at Sibos, Toronto 2017 at the Instant Payments Over SWIFT session in the SWIFT Auditorium.

[Daily News at Sibos coverage of the’ Instant Payments over SWIFT’ session - SWIFT Auditorium at Sibos]

The key benefits of the instant payment systems being rolled out in Australia and in Europe were discussed at Sibos Toronto 2017, at the Instant Payments Over SWIFT session in the SWIFT Auditorium.

Nigel Dobson, General Manager, Wholesale Digital Transformation, ANZ, was joined by Mehdi Manaa, Departmental Manager, European Central Bank (ECB), responsible for the Target Instant Payment Settlement (TIPS) platform, and Hays Littlejohn, CEO of EBA Clearing which is responsible for the RT1 platform.

The pan-European RT1 will be able to process 50 million transactions per day. “It will go live next month with 25 banks and this time next year 100-plus banks will be live. Banks don’t have to use it, the scheme is optional but many are realising it’s in their interests.

Hays Littlejohn, CEO/CFO of EBA Clearing

They identified speed, constant availability and data-rich messaging as the primary advantages of instant payment (IP) backbone infrastructures. Getting to these benefits, and enjoying the extra identity and liquidity services that open-IP systems can enable if they use ISO 20022 standardised messaging, is not easy, however, warned the moderator Diane Nolan from Accenture. “There is the connectivity challenge for banks and the issue of how best to manage risk controls around fraud, anti-money laundering [AML] and other such activities,” she said.

For Elie Lasker, Senior Market Manager at SWIFT, one way to meet the connectivity challenge is to use the SWIFTNet Instant solution, which can act as a messaging bridge to the new IP systems being rolled out around the world. “Unlike FileAct or FIN messaging, it can operate 24x7 and act as a connectivity gateway,” he said.

“SWIFT’s journey in this area began in 2015 when we won a bid to build the New Payments Platform (NPP) in Australia, which will be live imminently,” continued Lasker.

“Our three SWIFT design principles were followed to ease the challenges facing banks and prioritise efficiency.”

These principles are:

  • Enable infrastructure re-use, where possible.
  • Multi-CSM connectivity – the new SWIFTNet Instant solution conforms to this design requirement
  • Future proof the system.

“Future-proofing was the last, but not least requirement for the NPP. It is also something we follow for all new systems,” said Lasker, as he explained how this approach means the SWIFTNet Instant solution will connect to the ECB’s TIPS platform. It will also connect to EBA Clearing’s RT1 platform, which is designed for the single euro payments area instant credit transfer (SCTInst) that is about to go live next month.

According to EBA’s Littlejohn, the pan-European RT1 will be able to process 50 million transactions per day. “It will go live next month with 25 banks,” he said. “This time next year 100-plus banks will be live. Banks don’t have to use it, the scheme is optional but many are realising it’s in their interests.”

The TIPS platform will go live in November 2018, said Manaa, who explained that the ECB is talking to a “contact group” of banks and other interested participants to design the build out. “There will also be a TIPS App challenge on 6 February next year where banks and alternative payment services providers (PSPs) are invited to share their connectivity pilots and service ideas.”

ANZ’s Dobson was also excited by the “ability to invite non-banks and financial technology players in to do innovations on the service layer”.

“Some of the friction that exists in the global value chain at the moment could be reduced by interoperable ISO 20022-enabled IP systems,” he added.

The future is bright therefore, but getting there and overcoming the connectivity and integration obstacles at banks, will be a challenge.

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