Top 5 TIPS for the Introduction of SCT Inst
The recent InstaPay webinar “Transitioning to Instant Payments in Germany” provided some more TIPS (pun intended) for the introduction of SCT Inst. Icon’s very own Gene Neyer took part along with Britta Kotthaus-Kramer, Principal Director at Accenture GMBh, Elisabeth Kern-Thüringer, Senior Product Manager, Raiffeisen Bank International AG and Corinna Lauer, Director, Global Transaction Banking at UniCredit Bank. It was clear that there were common themes from across the presentations. Here are the TIPS I came away with (see, I’ve done it again!)
TIP 1: Benefits Case not Business Case
Britta from Accenture highlighted that Instant Payments should not take a classic ‘business case’ approach. Instead, banks should focus on the long-term benefits Instant Payments will offer, such as increased liquidity, staying relevant in a real-time world, and the ability to provide new products or services. Taking a ‘benefits case’ approach will help Banks face off challenges from new participants in the market such as Google, Amazon and Facebook. This was also echoed by Corinna who made the point that Instant Payments underlined UniCredit’s digital strategy.
TIP 2: RT1 or TIPS? The debate should not make Banks wait
German banks face a choice of CSMs: EBA Clearing’s RT1, already live, and ECB’s TIPS from November 2018. As Britta shared, each system has its own merits and will appeal to different kinds of institutions. Since both schemes are backed by strong organizations, Britta expects both of them to develop in parallel and would expect that it is only the largest banks that will connect to multiple market infrastructures – everyone else will rely on the interoperability between the schemes or on participation via a clearing bank.
TIP 3: Don’t underestimate the impact of 24/7/365
Both UniCredit and Raiffeisen Bank emphasised the importance of the 24/7/365 nature of Instant Payments. Elisabeth from Raiffeisen suggested that Banks review the complete payments process chain including payment processing system, core banking systems, and customer payments systems to really understand the impacts. With Instant Payments, there is a small time window allowed for processing real-time payments – can all of these systems operate within this window?
The Processing center has to be available 24/7/365 and the communication between the systems mentioned above has to be online for Instant Payments. There is no scope for weekend downtime!
Don’t forget that Financial sanctions screening systems and fraud detection systems have also to be involved in this online process and within this timeframe. And of course, liquidity provision has to be managed – the money has to be available 24/7/365.
TIP 4: Plan in phases
With all these considerations it is easy to feel overwhelmed with the decisions needed around Instant Payments. Corinna’s advice was to plan and deliver in phases. Banks don’t have to implement everything at once. Firstly, Banks should decide whether they are initially ‘creditor only’ or both ‘originator’ and ‘beneficiary’, then they can decide what customer channels Instant Payments will be offered to. Corinna also stressed that new value-added services do not have to be agreed up front, these are services Banks can look to introduce at a later date.
Gene from Icon agreed and shared that in order to bring the benefits of Instant Payments, banks will obviously need to make changes to the technical operations and business processes – practically every function will be affected to a lesser or greater degree – but the key thing is to package and sequence the projects so that each one advances the organization it its digital journey.
TIP 5: Invest appropriately and for the long-term
In Gene’s view, there are different options for bringing that change about. The key take away is to invest appropriately – since back office is not by itself a differentiator, focus on a solution that is cost effective to deploy and operate under a variety of volume scenarios (from very low to very high), which is designed for High Availability and 24/7/365, and which will support the legacy as the volumes migrate from legacy to real time rails.
‘Early adopter’ vs ‘Fast follower’
Numerous studies have shown that customers are willing to switch banks if the bank doesn’t make immediate payments available to them. Further, studies indicate that enabling just one or a few customer channels is insufficient – that broad deployment will increase adoption and market share. In fact, in Australia banks are now in a race to become a “default” payment destination – since whichever bank is specified in the phone/e-mail alias directory that bank will be the default choice for the customer transactions. And clearly – being a fast follower means that you will have to unseat the early adopter.
So those who don’t join early risk to miss out on the expected explosive growth of Instant Payments.
We at Icon Solutions designed our Instant Payments solution to the needs of the early adopter – with superior project ROI & ROA, excellent TCO and a proven methodology and partner support to rapidly and safely deliver value regardless of the speed of the uptake. You can find out more about IPF product here.
Richard Dear