The immediacy of our modern digital world demands easier and faster services, and electronic payments are no exception. In response to this demand, the European Payments Council (EPC) is bringing forth a new, more convenient era in payments with their SEPA Instant Credit Transfer (SCT Inst).
SCT Inst allows pan-European credit transfers to be initiated and funds made available in the recipient's account all in less than ten seconds.
This acceleration of payments is imperative in our digital economy. Today's international consumers are able to make ecommerce purchases from anywhere, at any time, including weekends, holidays, and even in the middle of the night. While the majority of traditional electronic payment systems do not operate 24/7, the ecommerce suppliers, vendors, and merchants who do want assurance of payment as soon as they sell their products or services. SCT Inst is designed to accomplish this need.
Instant Payment isn't a new concept — a handful of European countries have planned their own schemes for rapid payment settlement, but ran into a big problem: fragmentation. An individual national payment scheme would end at each country's border, impeding the streamlined function of a single market, and making rapid payments across Europe impossible. After all, SEPA had already achieved modernised, pan-European harmonisation with SEPA direct debits and credit transfers–to go back to individual national schemes for rapid payment would be a step back. A concurrent and cooperative pan-European payment policy is necessary for a truly efficient, convenient, and harmonised single market.
This need for a pan-European Instant Payment scheme was identified in 2014 by the ERPB (Euro Retail Payments Board), and two years later, the EPC designed, developed, and published their rulebook for the SCT Inst scheme. And now, 21 November 2017 will mark the launch of this innovative program.
The starting point of a payment (marked with a timestamp) begins once the originator's payment service provider (PSP) has determined the validity of all attributes necessary for processing the transaction. From that point, the beneficiary's PSP has a maximum of ten seconds to report that either the funds are available to the beneficiary or that the transaction has been denied. If extenuating circumstances prevent the completion of the transaction within the ten second window, the scheme rulebook anticipates a "time-out deadline" of 20 seconds. The originator's PSP cannot independently reject the transaction after the "time-out deadline;" instead, they must wait until the transaction failure is reported with a negative confirmation message from the beneficiary's PSP.
If an SCT Inst transaction has a higher value than the maximum of 15,000 Euros, it will be rejected by the financial institutions involved. However, this maximum amount can be overridden if all interbank participants previously agree to the transaction. And while the transaction must be initiated in euros, accounts operating within SEPA can be recorded in almost any denomination.
Flexibility is the backbone of SCT Inst. Participants have the option to set up (on a bilateral or multilateral basis) either shorter duration times and/or a greater default maximum amount. Their agreed-upon maximum amount will be need to be reviewed by the EPC each year, and the EPC will provide a list of the participants utilising these options.
As mentioned above, all SCT Inst services will be available and accessible around-the-clock: 24 hours a day, 7 days a week, 365 days a year.
The SCT Inst scheme incorporates many of the essential features of the EPC's existing SEPA Credit Transfer scheme as possible. These similar elements will aid and expedite the implementation of SCT Inst for PSPs, their customers, and any other market participants.
Instant payments offer the best substitute to cash since the exchange of funds is immediate and instantly available all day, every day.
Instant payments can further develop within the segments of person-to-person and person-to-business currency exchange — two current segments where cash and cheques are still widely used. The management of cash and cheques make them the costliest means of payment for the economy as a whole, and instant payments, can dramatically reduce these costs for everyone. Furthermore, the rising popularity of digital and mobile ecommerce payments can be further developed by the arrival of Instant payments.
With funds made available 24/7, both businesses and customers can streamline the management of their cash-flow while decreasing their dependence upon external financing.
Instant payments are a useful tool for PSPs — they can use the framework of instant payments to expand their own around-the-clock financial services, which can be used to not only better serve their existing clients, but to attract new customers as well.