Instant payments in euros (SCT Inst) represent a new era in terms of payments. Consumers continue to expect ever simpler and faster services, available 24/7. SCT Inst enables pan-European transactions in less than ten seconds on all calendar days of the year.
Will the scheme be compulsory and how to start preparing for it? These and other questions will be answered by Jiří Sandanus, managing director of Crede Experto.
What are euro instant payments and how do they work?
The institution of instant payments is not new; it has been around for many years. What was new, however, was the intention of the European authorities to introduce this instrument into the SEPA zone. Thus, the SCT Inst scheme was created, which allows pan-European credit transfers with funds available in the recipient's account in less than ten seconds, with the current cash threshold for a single transfer being 100,000 euros. In addition, there is no need for a strict euro currency account on the payer and payee side, although the SEPA scheme is designed for that currency only and the interbank transaction is always in euros.
Why were they introduced?
The primary concern was to limit cash payments. However, the second objective was directed at the card companies, which dominate the market for instant non-cash payments and charge significant fees for them. However, the final piece missing to successfully finalize the equivalent of card payments was the one that was introduced just recently -- the SEPA Request-to-Pay scheme. With its help, the payee can also initiate the payment, not just the payer, as has been the case so far. This finally makes it an equivalent of a card payment.
What is the use of this instrument in the European Union?
The use of instant payments is probably not yet as high as regulators and legislators would like. A look at the European Payment Council website shows that currently, instant payments account for less than 16% of total non-cash payments made in euros, which is quite a small percentage overall.
When are immediate payments in euros an advantage?
Instant payments have great potential not only in retail but also in commercial and corporate use. There are a lot of distribution wholesalers that distribute goods with carriers paying for them directly. This can be easily replaced by the institute of instant payments. Another example is import, supply chain or e-commerce, where goods can be paid for in a similar way without using cash.
Where does the Czech Republic stand? How many payment service providers have already joined the scheme?
The Czech Republic is in a less than ideal situation. According to statistics, we have two payment service providers that offer this service to their customers - Oberbank and J&T Banka. Of course, this is influenced by the fact that our main currency is the Czech crown. And instant payments in crowns are available through the CNB. However, this is also influenced by the low penetration of this service in the Eurozone.
What is the estimated evolution of this service?
Within the European Union, we can expect very similar developments to those we’ve seen with the introduction of SEPA payments. It wasn't great at the beginning but once parameters similar to those of euro instant payments were set, the scheme became mandatory for everyone. Thus, a decision is now expected to make the SCT Inst scheme mandatory for euro-paying countries as of 2025.
What is the biggest challenge for payment service providers now?
The biggest challenge is time. We have had several projects where instant payments in euros have been successfully implemented but they took one to two years. If the scheme is to be mandatory by 2025, it may be five minutes too late. It is not a trivial task to create such a scheme in the current banking core systems. It requires the creation of an appropriate communication infrastructure. In terms of the time required and the deadline, it will therefore be necessary to look for solutions that are available within a few months, or at most a year.
Source: Bankovnictví 2023/11