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Financial institutions prepare for new European payments architecture

Financial institutions prepare for new European payments architecture

Payments,
19 September 2019

SWIFT paper highlights the milestones for action and looks at the challenges and opportunities for financial institutions.

Brussels, 19 September 2019 

SWIFT has today published a new paper on the evolution of the European payments landscape and the preparations that need to be made by the region’s financial institutions. The paper, Brave new world: be ready for Europe’s new payments architecture, looks at the changes underway in Europe, the global context in which these are taking place and the challenging implementation timeline. It also sets out how SWIFT is supporting the industry through these changes. 

Europe’s payments market infrastructures are being redesigned and renewed, allowing for greater operational and collateral/liquidity efficiency, and supporting innovation. The migration of Europe’s high value payment systems to ISO 20022 lays the foundations for richer, structured data end-to-end across the value chain and supports better compliance. The move to instant payments is also well underway, with many domestic initiatives either live or in the process of implementation, and two pan-European services already live. 

Planning successfully for the go-live in 2021 of the Eurosystem’s TARGET Consolidation and the evolution of EBA CLEARING’s EURO1 demands careful consideration of the wider changes affecting the global payments landscape and the interdependencies and opportunities that will result. Understanding the pathways to future interoperability – and what will be required to fully participate in the future payments eco-systems – will be critical for financial institutions.

Once all the building blocks are in place, interconnected, global digital ecosystems will quickly emerge. In the near future, it will be possible to channel instant payments across borders and through domestic systems to beneficiaries’ accounts anytime, anywhere – with complete certainty and rich information.

Alain Raes, Chief Executive EMEA and Asia Pacific at SWIFT, said: “The financial industry is undergoing profound change. Migration to Europe’s new payments architecture will be a significant market event demanding careful planning and implementation. Financial institutions are getting ready for this huge change with an eye to the wider impacts for their business models and their customers in an interconnected, fast-changing global landscape. We are committed to supporting our community through this transformation as a trusted partner, and helping them to capitalise on the opportunities.”

What’s changing in Europe

The Eurosystem is modernising and consolidating its market infrastructures. Its high value payments system, TARGET2, and TARGET2 for Securities will be consolidated, and TARGET2 will be replaced with a new real-time gross settlement (RTGS) system using the ISO 20022 messaging standard. The new consolidated platform will be launched in November 2021. 

In parallel, EBA CLEARING, the privately owned provider of pan-European payment infrastructure, is evolving its EURO1 and STEP1 platforms. 

For financial institutions, these changes will be felt in three areas: format, connectivity and processes. In turn, each of these has an impact on the end-to-end chain of applications at financial institutions, which will need to cater for the additional information that is required and carried in the new ISO 20022 messages. 

Since the ECB’s appointment of two network service providers (NSPs) in July 2019, banks have been able to select their NSP; the final deadline for selection is July 2020. All developments must be completed by October 2020. User testing with the Eurosystem will begin in March 2021, with migration set for 22 November 2021. 

Reusing existing SWIFT technology for ESMIG connectivity safeguards users from the risks of a complex new implementation and allows futureproofing against other infrastructure changes. With a single window, financial institutions can connect to ESMIG for all TARGET Services and to EURO1, RT1 and other infrastructures of choice.

Download paper

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SWIFT: Finsbury
Phone: +32 (0)2655 3377
SWIFT@Finsbury.com


About SWIFT

SWIFT is a global member owned cooperative and the world’s leading provider of secure financial messaging services. We provide our community with a platform for messaging and standards for communicating, and we offer products and services to facilitate access and integration, identification, analysis and regulatory compliance. 

Our messaging platform, products and services connect more than 11,000 banking and securities organisations, market infrastructures and corporate customers in more than 200 countries and territories. While SWIFT does not hold funds or manage accounts on behalf of customers, we enable our global community of users to communicate securely, exchanging standardised financial messages in a reliable way, thereby supporting global and local financial flows, as well as trade and commerce all around the world. 

As their trusted provider, we relentlessly pursue operational excellence; we support our community in addressing cyber threats; and we continually seek ways to lower costs, reduce risks and eliminate operational inefficiencies. Our products and services support our community’s access and integration, business intelligence, reference data and financial crime compliance needs. SWIFT also brings the financial community together – at global, regional and local levels – to shape market practice, define standards and debate issues of mutual interest or concern. SWIFT’s strategic five-year plan, SWIFT2020, challenges SWIFT to continue investing in the security, reliability and growth of its core messaging platform, while making additional investments in existing services and delivering new and innovative solutions.

Headquartered in Belgium, SWIFT’s international governance and oversight reinforces the neutral, global character of its cooperative structure. SWIFT’s global office network ensures an active presence in all the major financial centres.

For more information, visit www.swift.com or follow us on Twitter: @swiftcommunity and LinkedIn: SWIFT.

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