SEPA Instant Credit Transfer (SCT Inst): what is it, and what is its future?
In November 2017, European countries witnessed a huge shift in the payments landscape. After extensive work by the European Commission, the European Parliament, the Council of the EU and the European Central Bank, a landmark initiative came into force. Since then, the Single Euro Payments Area (SEPA) Instant Credit Transfer (SCT Inst) scheme has become a cornerstone of European banking and payments.
What is SCT Inst?
SCT Inst facilitates the transfer of funds between registered accounts operating across Europe. So a payment made in Berlin, for example, can reach Madrid, Rome, Amsterdam or Munich in equal time. Payments arrive in the recipient’s account in less than 10 seconds.
While all payments under the SCT Inst scheme must be made in Euros, there is no obligation for payment accounts to be denominated in the EU’s currency.
Payments made under the SCT Inst scheme can be processed 24/7. It ensures there is no longer dependency on traditional opening hours.
Why does SCT Inst exist?
SCT Inst is designed to match and exceed today’s changing customer expectations. Consumerization is driving new habits and assumptions, changing consumer behavior at unprecedented speed.
Today, the concept of making payments only during a bank’s opening hours is alien to increasingly large numbers. When services can be rendered and delivered instantly, the expectation among consumers is that payments should be facilitated ‘now’ — whenever and wherever they are, and whatever they are doing. The rise of smartphones and increased connectivity, with 5G also looming on the horizon, has only strengthened this expectation.
SCT Inst is designed to increase the speed at which payments are harmonized across Europe, reinforcing its single market and driving stronger financial processes throughout.
How many countries operate under SCT Inst?
SEPA consists of 36 countries . Not all of them, however, use SCT Inst. As of November 2019, 22 countries had registered payment service providers (PSPs) participating in the SCT Inst scheme. They were (from west to east): Ireland, Portugal, United Kingdom, Spain, France, Belgium, Netherlands, Luxembourg, Monaco, Germany, Italy, Denmark, Austria, Sweden, Malta, Poland, Lithuania, Latvia, Finland, Bulgaria, Estonia, and Cyprus .
What volume is involved?
Almost six in 10 European PSPs have registered in the SCT Inst scheme. That amounts to more than 2,250 PSPS stretching across the entire continent. SCT Inst volumes now account for almost 6% of all of SEPA Credit Transfer volumes.
How can SCT Inst be used?
Payments made under the SCT Inst scheme could initially reach up to €15,000. On 1 July 2020, the limit will rise to €100,000. This provides extreme flexibility and opens opportunities for SCT Inst payments to be used in a variety of scenarios. These include:
Introducing a new Payment Card Initiative: SEPA Instant Payment Card
The next phase of development in European payments is likely to build on SCT Inst. The Smart Payment Association has put forward plans for an instant payment card, combining the traditional EMV standards and existing POS with the payment processing and speed of SCT Inst. This approach, says the SPA, would fit within the frameworks outlined by PSD2 and make use of existing Open APIs.
From the customer’s point of view, nothing changes apart from using a new card. After that, their experience is identical to traditional card payments, with both PIN and contactless payments available through the current machinery they are used to seeing in shops across Europe.
Under this system, each card would hold a primary account number (PAN). This would be a proxy for the customer’s IBAN. When the customer makes a payment, the request — including the payee’s PAN/IBAN — is submitted across Open APIs to the customer’s bank. The customer’s bank then verifies the details and authorizes a payment to the merchant’s bank using the SCT Inst scheme.
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