9 July 2019
Instant payments are the new normal in the Netherlands; who will follow?
This article was originally published on the website of the European Payments Council
The Dutch payment service providers (PSPs) community is one of frontrunners in the instant payments field: some Dutch were among the first to adhere to Single Euro Payments Area (SEPA) Instant Credit Transfer (SCT Inst) in 2017. Since early 2019, this great real-time experience has gained significant ground. We interviewed Piet Mallekoote and Inge van Dijk from the Dutch Payments Association to find out more about the SCT Inst rollout, the challenges faced, and future developments in the Netherlands.
Can you tell us more about the early Dutch experience with the SCT Inst scheme? Could you briefly explain the implementation approach and share some quantitative data?
The four largest Dutch banks committed in early 2015 to build an instant payments infrastructure under the programme guidance of the Dutch Payments Association. All relevant stakeholders, including the Dutch Central Bank, have been involved from the start. From the beginning, the view has been that instant payments should become the new normal. Customers – both consumers and businesses – expect to get service instantly, 24/7 from their PSPs, especially when it comes to payments. Our commitment to the market was to open up instant payments to all customers using mobile and online banking as of May 2019. After a period of extensive end-to-end (E2E) testing, the instant payments infrastructure went into production. Since then, banks have been gradually turning up the volume: opening to more and more customers using mobile and internet banking channels. The potential single instant payment volume in these channels amounts to one billion transactions annually. The implementation approach is based on a controlled, stepped rollout rather than a big bang. At this point in time, we have processed over thirty million instant payments transactions in total, and we are currently averaging more than half a million transactions a day. The E2E performance is more than satisfactory: almost all transactions (over ninety-nine and a half percent) are within five seconds. Our uptime (24/7) is high and stable (greater than ninety-nine and a half percent) and our reject rate is well below half a percent. The participating banks have each opted to offer instant payments by default, giving the customer this great payment experience from the start. Instant payments truly are the new normal.
What are the main lessons already learned?
Ensuring reach within the Dutch community has been a key starting point. The commitment of the banks involved ensures that over ninety-five percent of Dutch payment accounts are reachable from the start. This will provide a reliable and predictable customer experience. Interoperability within the SEPA area has proven more of a challenge than expected, leaving banks with the possible burden of the costs of connecting to more than one clearing and settlement mechanism (CSM) to secure reach across Europe. It’s good to see that this is already on the minds of many key stakeholders. The E2E performance joint test-runs have proven highly valuable given our implementation approach. They have allowed us to identify issues both in primary as well as supporting processes. As some are already aware, a fraud identification marker has been added, making use of the ‘white’ fields in the transaction message so that banks can opt to pass on fraud detection information to allow for prevention of further fraudulent cash withdrawals. Last but not least, the instant payments project in the Netherlands was kicked off with full board commitment from the banks – a critical condition to be able to run a highly innovative and also costly project over multiple years.
What new opportunities does SCT Inst open up for Dutch PSPs and their customers?
Dutch banks have built for the future. Offering customers instant payments by default through online and mobile banking channels will trigger the mainstreaming of instant payments. The market is expected to be inventive, also using the revised Payment Services Directive’s (PSD2) possibilities with instant payments to deliver innovative payment experiences. The opportunities are endless, ready to be adopted by existing and new businesses.
How do you see the use of the SCT Inst scheme evolving in the future?
We would like to see the amount limit increased sooner rather than later and preferably discarded all together. Furthermore, we believe the European Payments Council’s (EPC) eye should be on making sure that the rejection rate for the SCT Inst will near that of the SCT in the coming year. With regard to fraud detection and sanction screening, both, in essence, in the bank’s domain, we believe the EPC can play a catalytic role. Realising full interoperability, preferably via a single CSM connection, and full reachability are prerequisites for all to ensure that instant payments mature into a pan-European payment product.