The road to achieve interoperability for Instant Payments is all about connecting the dots together

InteroperabilityCompare it with the deployment of a European railway system; there is a need to agree on the width of the railways and the space between the rails. Only because all individual country laid the rails according to this agreement, railways throughout Europe could be connected to a single network across each country. The same goes for the interoperability of various clearing and settlement mechanisms in Europe, now that Instant Payments will become a reality in 2017. What does it take to achieve this level of European interoperability?

Interoperability is a necessity in order to make Instant Payments work across banks and countries, as described in a previous blog on Instant Payments. It is as simple as that, but it takes time and effort to achieve interoperability between the various EU countries and the Automated Clearing Houses (ACH’s). The road to achieve this interoperability cannot be compared with the introduction of SEPA. Where SEPA was a top-down decision, introduced with a big bang in all the countries at the same time, the introduction of Instant Payments is much more bottom-up. The SEPA model has been turned upside down with Instant Payments, making it necessary to tie all the different dots together, to achieve one infrastructure. Read more

Public consultation of the new SCT Inst scheme is proving to be successful

European Payment Council“I anticipate a strong demand for instant payment services in Euro across EU countries”, said Helmut Wacket, Head of Market Integration Division at the European Central Bank in a recent interview on the website of the European Payments Council (EPC). “If providers do not want to lose out on this business and on users from future generations, they will have to provide instant payments services.” In order to make Instant Payments possible, the EPC proposed the design of a new SCT Instant Payment scheme, called SCT Inst. How can SCT Inst stakeholders find the balance between setting targets and remaining ambitious at the same time?

In SEPA, some countries – the UK and Denmark for instance – have successfully launched domestic instant payment solutions. These operate only within the borders of individual countries or among customers of the same payment service providers (PSPs). To avoid a fragmentation of solutions the ERPB has called for a pan-European solution. The SCT Inst scheme will be based on the credit transfer payment instrument, for transactions in Euro throughout SEPA countries. “In order to make it as cost-efficient as possible for the scheme participants, it will have, where possible, the same foundations as the existing SEPA Credit Transfer scheme (use of same business rules, datasets, attributes and exception handling)”, according to the EPC. Read more

Contactless payments in order to boost Italian consumption and competitiveness

Contactless paymentsMore and more often, we happen to hear people talking about a near future in which we will not use cash anymore. According to some, it could even happen within 2025. Actually, the world of digital payments is going through a period of great ferment. Technologies applied to financial transactions are becoming more and more innovative and accessible like the Identity Check App by Mastercard, that allows authorizing a payment through a simple selfie. In a recent blog we wrote about the usage of contactless payments in Europe, but what is the status in Italy? The Italian citizens that are traditionally bond to the use of cash are now showing less scepticism towards the news that are claimed as apparently ground-breaking.

The trend has grown because of the highest propensity of the end-users to use smartphones or tablets for online purchases of goods and services. In Italy, even though the number of cards per capita is among the highest of Europe, in terms of digital payments, we still have such a very long way to go. Evidence by the figures recently released by Visa Europe show that in the last 12 months – from May 1st  2015, to April 30th 2016 – 3 billion contactless transactions were made on Visa network, that means over three times towards what was registered for the same time of the previous year. But still: Italy finds itself one step back. Read more

‘Contactless’ is stuck in elderly land

PaymentWe can buy our groceries, movie tickets and a cup of coffee with just a simple slide of our bank card or a single touch on our smartphone. But even though this ‘new’ payment systems were introduced years ago, a recent survey of Future Thinking shows a lack of trust. If ‘contactless’ wants to grow, it really needs to get the elderly on board. Read more

The payments industry needs to close the gap between user experience and payment options

mobilepaymentEven if you’re number one, you have to think like number two. Market leaders simply can’t stop and enjoy their lead, because the competition is keen to take their spot at the top. This also applies to companies in the payments industry: market leaders must continue to innovate in order to maintain the largest market share and to remain relevant. We see a distinct difference in business models emerging nowadays: companies either choose to focus on payments or they focus on the user experience. In the era of rapid digitalisation, what is the best strategy for financial companies to get and remain relevant?

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The ongoing debate of the future of cash money is not coming to an end soon

cash money registerEven with the growing popularity of electronic payments, mobile banking and digital wallets cash remains resilient. That is the conclusion of the recent publication of G4S, a cash management company, on cash use across 28 European countries. ‘The volume of cash in circulation has increased 11 percent up to 2015 with cash now making 60 percent of all payment transactions’, according to the report. Is cash here to stay? The answer of that question depends on who is answering it. “In five years the vast majority of the cash will be out of the system”, says the opposing side MasterCard.

Let’s zoom in on the various opinions and beliefs on the future of cash payments. To say something about the future, it is eminent to research the present state; how many transactions are made with cash and is there a trend in cash payments? Read more

Peer-to-peer cash remittances as a springboard for digital payments

p2p paymentsThe rapidly growing popularity of mobile peer-to-peer (P2P) cash transfers in recent years holds pride of place as one of the most exciting developments in m-payments & commerce. An Economist Intelligence Unit (EIU) survey of major European banks reveals that financial technology is radically alter the relationship between the users and providers of banking services, with 65% of the over 200 banking executives interviewed expecting further growth especially in retail P2P payments.

P2P payment services enable individual users to transfer small amounts of cash in real time – to split the bill for an evening out, for instance, or to pitch in for a collective gift – using “instant payment” mechanisms that make the transferred funds immediately available to the beneficiary, essentially doing away with the tedious and time-consuming procedures associated with bank drafts (which are still preferred for transactions entailing larger sums). Read more

Should the old and new worlds compete or cooperate?

Michael SteinbachTo compete or to cooperate? That is the main question of these challenging times for banks and fintechs, where innovation is constantly and radically reshaping the payments industry. It seems that the market is roughly divided by the two forces, but I think that a change of scope is needed to answer the first question. The real question is: how can banks and fintechs deliver better value for customers?

The needs and requirements of the European, but overall global payments market are rapidly evolving. In the payments industry, the market can be roughly divided in two streams. Read more

Why it’s not a bad idea for Apple to slowly evolve in the payments industry

Apple_Pay_logoAlthough Apple Pay was already introduced in September 2014, the mass adoption of this mobile payment technology has been lagging. However, Apple continued investing in R&D to expand the technology, expanding its partners network and introducing new services such as payments for parking. Apple is entering this market very gradually, which is a different strategy than their earlier innovative products. Still there are several reasons to assume that this has actually been a successful strategy.

Paying with placing your phone at the terminal and your finger at the button on your iPhone. That is how simple Apple Pay works for consumers. The credit card industry was happy to embrace the new solution as well, because Apple partnered with the banks that issued credit cards. Read more

Baroni: ‘Important to move to instant payments but also maintain the high security, low risk and low fraud’

Screen-Shot-2016-02-05-at-10.34.02The move to instant payments is quite an undertaking with high initial investments and big, high-risk projects. It comes with both opportunities and challenges for the industry. “It is therefore important that we make the move, but also maintain the high security, low risk and low fraud,” explains Alessandro Baroni, CMO at Equens. “We must keep earning the trust that we have from the customer.” Baroni explains what the challenges are for the financial industry now that instant payments will become a reality in the near future.

The European banks and the national communities have made significant investments in their payments infrastructure through the creation of SEPA in the last decade. But at the same time, there has been a spur of innovation coming from non-traditional players. The challenge for the banks now lies in keeping the bank account in the centre of payments and building on the harmonized payments landscape created by SEPA. Read more