The payments industry is moving towards complete instant transactions and continuous accessibility. The recent regulation mandating banks to support Instant Payments marks a pivotal step. Presently, Instant Payments constitute around 15% of transactions in Europe, but the growth isn’t keeping up with industry aspirations. One key hindrance is the pricing difference between traditional SEPA and Instant Transactions. In the Netherlands, the large retail banks had a different approach, making Instant Payments the new normal. As a result, the majority of transactions are now processed within 7 seconds, 24/7, and the expectation is that the new regulation will repeat this success across Europe.
Projective Group has assisted numerous European banks and a key clearing institute in implementing Instant Payments. Our Instant Payments expert, Robert-Jan Wekking, shares his experiences with us.
My initial encounter was when I assumed the role of Programme Director for Instant Payments at a major clearing house supporting large retail banks in the Netherlands. Transitioning from batch-oriented processing to an always-open system – that operated within seconds with no maintenance windows – brought considerable challenges. I vividly remember the live date when we successfully experienced processing of IP transactions in the Netherlands.
Transitioning from batch-oriented processing to an always-open system brings considerable challenges.
My subsequent experience was as a programme manager for the implementation of Instant at an automotive bank. Their objective was to enable car dealers to deliver cars over weekends. Previously, a car buyer had to pay at least two days before the weekend to obtain confirmation from the administration that the payment was received. With Instant Payments, buyers can pay instantly, and dealers can immediately confirm successful payments, reducing administration and uncertainty in the payments process.
The transition from a batch-oriented process to an Instant Process impacts not just technology but nearly all payment functions. For instance, banks must decide how to operate round-the-clock and handle client queries about specific transactions. Other examples include changes to Treasury processes for continuous funding and liquidity monitoring, and Compliance adapting to a 24/7 operation.
The transition from a batch-oriented process to an Instant Process impacts not just technology but nearly all payment functions.
Defining the operating model, not only for the happy flow, but also for the exceptions is a critical part of an instant payment process.
Several pitfalls will require attention from the beginning. I’ve already mentioned the operating model, but another key consideration is validating the real readiness of a vendor. Non-functional performance is critical, as there is only limited time for every party in the value chain. Recent experience with one vendor exposed the amount of work necessary to fully optimise their processes and enable Instant Payments.
A key consideration is validating the real readiness of a vendor.
Also, connectivity is critical. Particularly the connection between the clearing institute and the bank will have to be agreed upon. It can take more than six months to get a leased line, and expertise in the market is scarce. Early planning of these details is crucial if the overall project is to succeed.
In addition, having processes in place for the non-happy flow is critical. For example, when an instant payment is rejected, are you resending the transaction or are you using the regular SEPA channel? And what does that mean for your customer experience?
Finally, and another critical element is testing and certification. The certification is a key milestone to being allowed by the scheme to send Instant Payments, and achieving this requires evidence of a comprehensive testing approach, including planning for future regression testing, etc.
It doesn’t stop there, there are multiple other design decisions to be made, for example, fraud management, transaction monitoring, and release management.
It is critical to define a payments programme that includes all functions rather than to make it a technical implementation programme. Understanding the design principles, the operating model and the Instant Payment processes is a prerequisite before any technical choice can be finalised. It is possible to run different streams in parallel if the end-to-end impact is fully understood.
It is critical to define a payments programme that includes all functions rather than to make it a technical implementation programme.
Collaborating closely with other parties in the value chain, such as the selected clearing house, is essential. Support from cooperative banks is vital to navigate the certification process successfully. As mentioned earlier, it’s a complex project that demands concerted efforts.
We always start with training the stakeholders and project participants on Instant Payments. From our experience, we see that it is essential all understand the impact of the transition. This also makes the discussions in the design workshops better, which leads to better design principles, business operating model, and business architecture.
Based on the outcome of the individual bank, combined with our experience with and understanding of vendors and their readiness, we are fully able to support a rigorous selection and implementation process.
Our Instant Payments experience enables banks to accelerate the process, as we have extensive repositories of design principles, functional and non-functional requirements, and user stories. Also, our experience with testing, and strong relations with various parties in the value chain, create a robust foundation for a successful implementation process.
We enable banks to accelerate the process, as we have extensive repositories of design principles, functional and non-functional requirements, and user stories.
We are delighted to connect with banks at the start of an Instant Payments journey and stand willing and able to support them in kicking off a critical strategic programme.
Established in 2006, Projective Group is a leading Financial Services change specialist.
We are recognised within the industry as a complete solutions provider, partnering with clients in Financial Services to provide resolutions that are both holistic and pragmatic. We have evolved to become a trusted partner for companies that want to thrive and prosper in an ever-changing Financial Services landscape.