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SIBOS day 1 – How an app challenge can improve the use of Instant Payments

Sibos 2017Banks, PSPs and tech providers can all compete to present the best app (or the prototypes) for Instant Payments on the 6th of February in 2018 in Frankfurt during the #TIPSapp Challenge. This challenge is going to be organized to stimulate the creation of apps so consumers can pay easily via Instant Payments with those apps. The underlying infrastructure and several stakeholders will be ready in the near future to process Instant Payments. The European Central Bank (ECB) has initiated this app challenge to stimulate the uptake of these new payments based on new apps for consumers.

That was one of the most interesting aspects during the presentation of the European Central Bank (ECB) on the first day of SIBOS in Toronto. The ECB also introduced TARGET Services, the new umbrella brand for all Eurosystem financial market infrastructures. In this session Marc Bayle de Jessé, Sylvain Debeaumont and Mehdi Manaa from the European Central Bank talked about the functional aspects of the new TARGET Services. The European Central Bank is reshaping its market infrastructure services to enable citizens and businesses to transfer money across Europe 24 hours per day for 365 days per year. The main objectives behind this reshaping are innovation, safety, efficiency and resilience.

Status of TARGET services for Europe

The ECB gave an update of the status of the TARGET services for Europe and its views for the future. The migration to TARGET2-Securities (T2S) is now completed. T2S, is a single, pan-European platform for securities settlement in central bank money. It brings substantial benefits to the European post-trading industry and is one of the largest infrastructure projects launched by the Eurosystem so far. There are 20 Central Securities Depositories (CSDs) that are representing 20 European markets on board. At the moment on average 550,000 transactions are settled daily.

In November this year we celebrate the 10th anniversary of TARGET2 (T2), the Eurosystem’s real-time gross settlement (RTGS) system. T2 and T2S are both running smoothly, but they are largely independent systems in separate silo’s. With the introduction of the new TARGET Instant Payment Settlement (TIPS) service, this silo approach no longer works. This is why the Eurosystem wants to further consolidate its systems and bring them closer together under the Target Services umbrella.

TIPS: integration is a must

The main reason for the introduction of TIPS is to avoid new fragmentation in the market. There is a strong global trend in the market towards instant, but this could also lead to new market fragmentation in Europe with lots of different local Instant Payment solutions. “Integration is a must” stated Marc Bayle de Jessé clearly during the presentation at SIBOS. The ECB is strongly motivated to avoid further fragmentation and TIPS will help, but further steps are needed to realize that.

The goal for TIPS is to go live in November 2018 and that is a tight time plan to deliver. Other challenges are the low latency, high volume, high availability, reliability and scalability. And then there is of course the challenge of getting consumers and businesses to start making Instant Payments. It is good that TIPS is there and that the payment landscape is preparing itself to get ready for Instant Payments, but more work is needed. There need to be compelling use cases to stimulate the uptake of Instant Payments, according to the ECB.

Apps to initiate Instant Payments

The ECB states: “TIPS, or any other market infrastructure alone, will not be enough to ensure that the citizens of Europe start using Instant Payments.” This is where user-friendly apps come into play. People need to be able to initiate Instant Payments with apps they like to use. The organization of App Challenge in Frankfurt in February, even a few months before the actual go-live date of TIPS, is therefore a great idea.

equensWorldline will connect its European and national Instant Payments Clearing and Settlement services to TIPS from the first day TIPS is operational, thus providing easy pan-European reach to its connected banks and PSPs through one technical interface. equensWorldline sees Instant Payments are going to revolutionize the way Europeans pay. It will start to develop widely among individuals for person-to-person payments (P2P) and will move to person-to-business (P2B) use cases, including corporates, merchants and governments. In equensWorldline’s opinion, Instant Payments won’t stop here and will go further to address business-to-business (B2B) payments and even machine-to-machine (M2M) payments with the rise of the IoT in our lives. See more information on Instant Payments and its use cases in the recent infographic:

Infographic Instant Payment UK

This article was posted in Instant Payments, SIBOS 2017.

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