By 9th October, all payment service providers within the European Economic Area that offer euro credit transfers must also enable their customers to send and receive SEPA instant payments.
The precise impact on corporates will depend on where they are in the treasury technology lifecycle. For some it will represent their first foray into instant payments and not just an opportunity to resolve payment issues for business partners, but also to justify the investment required to support their own businesses’ payment requirements.
During a briefing call with Bank of America’s global payments solutions team last week, Chris Jameson, head of Product Management for GPS EMEA suggested that over time, corporates could be expected to move a growing percentage of their ACH transactions to SEPA instant payments.
“However, we don’t expect a massive switchover in every treasury department in October where existing flows all move to SEPA instant overnight,” he said. “Many of the companies that want to pay this way are doing so already because they are API native and have the technology stack to support that.”
In addition to e-commerce, David Voss, head of Payments and Receivables for GPS EMEA refers to the potential for interesting niche applications where speed of payment or financial use cases come to the fore.
“We have seen a lot of interest from industries such as logistics relating to cash on delivery and other aspects around movement of goods,” he said. “In the financial sector there is potential in areas such as deposits for mortgages or car purchases.”
Insurance companies have been exploring the potential of instant payments for paying out on policies where funds are required quickly, such as hospital bills accrued under travel insurance.
According to Vadym Voitiuk, Principal Solutions Architect at AWS (who was not part of the briefing call), SEPA instant payments is not just about speed – it finally creates an EU-based alternative to ‘instant’ payment providers such as Visa, Mastercard, PayPal and Venmo.
“This means that instead of between 1.2% and 2.7% of every digital transaction flowing to a US-based payment service provider, that margin can now stay with European merchants,” he says. “Not a bad number for a moderately growing EU economy.”
In addition, Voitiuk observes that the new regulation “effectively removes the need for merchants to implement their own complicated payment security controls – as it is done in near real-time by a bank or payment service provider – while saving significant costs.”
In the EU, verification of payee is being rolled out as a key fraud prevention tool. But Jameson admits that more is to come and the industry will need to work together to enhance such measures.
According to Voss, there are other ways in which the payments industry is looking to further mitigate fraud risk. “Verification of payee is just one tool, albeit a very important one,” he said. “As much as anything, it will create confidence with the payer that they are paying who they think they are paying.”
Voss added he is confident that such measures will continue to evolve over the next few months. “In terms of providing the maximum amount of information and supplementing that, as has been seen in the UK, with guidance for payers to take the necessary diligence, it is going to be an extremely useful tool and one we are spending a lot of time on thinking how do we articulate that to corporates and how can they best use that information in their own systems,” he said.
