Whether it’s the European Payments Initiative, cross-border payments, or the need to migrate messaging standards to ISO 20022, European banks need to be ready for a new world of real-time payments — especially since the ECB’s Governing Council has mandated the full deployment of immediate payments across the eurozone by the end of 2021.
But integrating interoperable payment systems, and innovating on top of them, is no mean feat. To try and tackle this, European authorities are utilizing a new interface called European Single Market Infrastructure Gateway (ESMIG). This will serve to synchronize TARGET services, simplify access, boost connectivity, allow firms to work from common reference data, and to leverage shared data and billing systems.
Designing effective ways to serve both existing and new corporate customers has never been more important. It is an ideal time for banks to differentiate themselves by offering value-added services, from consumer [NC1] payments experiences to improved liquidity management. Speed and simplicity in client onboarding is a critical factor, as the sooner and more effectively corporate customers can be onboarded, the sooner “instant” can be a reality.
The emergence of more recent schemes, such as P27 in the Nordics, widens the range of possibilities as well as increasing the complexity of adoption for banks that do business in multiple regions.
The Challenges of Transformation
Europe has the potential to become a model in real-time payments innovation but there are barriers to overcome: the landscape is confusing, there are many technical considerations to grapple with, and banks have hundreds of other urgent projects to attend to. They need a partner to help power transformation—but finding one is easier said than done.
Banks often operate with multiple legacy engines with minimal and dated documentation, therefore nobody within the bank can confidently update or alter systems. Additionally, they cannot afford the risk of disruption to operations while they transform; downtime is simply not an option.
Since there are multiple options for instant SEPA credit transfers (RT1 and TIPS), banks also need guidance on which network they should connect into. This means they need a consultative partner, not just a vendor, to ensure they are adding value in the right places.
Banks must ensure they can offer 24x7x365 service across the end-to-end processing lifecycle. And in today’s competitive landscape, speed is everything. A lack of standardization reduces the speed at which transactions are processed, so finding a partner who is an ISO 20022-native is essential.
A Change in Mindset
Instant payments are not just a new payments type, and adopting instant payments is not just a matter of running a payments project and creating another silo. Rather, instant payments provide an opportunity to change mentality and allow technology to drive a new way of doing business. By eliminating the inefficiencies of the typical bank payments operations and functional departments which often waste resources in complex back offices, banks can instead focus on expanding their business by offering new services to the market, at speed.
Whilst technology is important and incremental to success, the path to true payments modernization relies on having the right people in place to deliver against a vision — and that extends to the vendors and partners a bank works with.