Instant Payments: the SEPA Instant Payments rulebook is published, what’s next?

| 20-2-2017 | Boudewijn Schenkels | Sponsored content |

At the end of last year the SEPA Instant Payments requirements from the European Payments Council have been published. Consequently the Dutch requirements 3.0 from the Dutch Payments Association were published last month.

SEPA Instants Payments (also called SCT Inst – SEPA Credit Transfer Instant) will allow sending and receiving money 24/7 in seconds. European banking communities can go live from November 2017, the Dutch community has planned to go live from May 2019 with the first Instant Payments services. The development of the SEPA Instant Payments infrastructures of the banks and processors are in train. In april 2018 the start of the inter-CSM testing is planned, the end-to-end bank tests and the pilot phase from January until April 2019.

From our Instant Payments training classes for business professionals and IT staff, we find that participants are not fully aware of the large impact Instant Payments will have on the complete value chain and the opportunities it will bring. In order for you to understand the impact and opportunities, I will explain how Instant Payments are processed.

To give an impression of all the change aspects for users, the banks and the interbank processing side:

For corporates amongst others:

  • Different and new initiation processes, including, if applicable, instant insight in the failure of the payment;
  • New cash management and/or ERP applications or upgrades;
  • Reconciliation aspects;
  • Requirements for instant insight of bank account mutations;
  • Changed processes to monitor late payments (as they can be delivered eg. in the weekend);
  • Evaluate the potential of new services based on Instant Payments;
  • 24/7 operation required?
  • Possibilities in product differentiation.

 For banks amongst others:

  • Support new payments processes;
  • Real time and 24/7 reporting;
  • Extra notifications and reach filtering (as SEPA Instant Payments is not mandatory);
  • Revised (24/7) operational processes;
  • Changes to fraud/AML/sanctions management;
  • New sales and product management activities and roles;
  • Changes liquidity management processes and monitoring;
  • New clearing channel(s).

For processors amongst others:

  • New clearing and settlement processes;
  • Revised operational processing and monitoring;
  • New sales and product management activities and roles

As the launch dates come nearer it certainly triggers managers to now thoroughly evaluate scope and time scales for (required) internal projects and ensure to be ready and steady before launch in 2019 as well as business professionals to anticipate and grasp the potential opportunities.

The key differences between the current SEPA Credit Transfer and the new SCT Inst scheme are:

  • 24/7 available (no downtime)
  • real-time (5 seconds in Netherlands round trip)
  • real-time failure notifications
  • single transaction only

Instant Payments process

In our training, we also explain the differences between the normal payment flow (SCT) and the Instant Payments flow (SCT Inst). The process flow is described below in summary and will take place in several seconds.

 

Figure 1. (Source: EPC Rulebook)

Several key actors are involved in the payments process:

  • Originator: party sending the payment (payer, customer of the bank)
  • Originator bank: the bank of the payer
  • CSM: interbank party that clears and settles the payments between banks (Clearing and Settlement Mechanism)
  • Beneficiary bank: the bank of the payee
  • Beneficiary: the party receiving the payment (payee, customer of the bank)

The new process in summary:

The Originator Bank receives an SCT Inst Instruction from the Originator (Step 1). It verifies the instruction and sends the transaction to the CSM (Step 2), which verifies the message, ensures that the Originator bank has enough funds and instantly sends the SCT Inst Transaction message to the Beneficiary Bank. The Beneficiary Bank instantly verifies the payments and if it can be booked on the account of the Beneficiary (Step 3). The Beneficiary Bank confirms to the CSM if it was successful (positive confirmation) or not (negative confirmation with an immediate Reject) (Step 4). The Beneficiary can withdraw the funds (Step 5) instantly if in the previous step the confirmation was positive (and after the Beneficiary Bank has ensured that the CSM received the positive confirmation message). The CSM instantly reports to the Originator Bank if the SCT Inst Transaction had been successful (or not) (Step 6). In case the Originator Bank receives a negative confirmation about the SCT Inst transaction which indicates that the funds had not been made available to the beneficiary, the originator bank is obliged to immediately inform the originator (Step 7) and lift the reservation of the amount made in step 1.

All in seconds and 24/7!

This all means, that beside the flow of money, there is also a flow of messages between the customer and the bank. Both Beneficiary and Originator will be informed (in a few seconds) that the transaction is done (or not).

Are you interested in what the new SEPA Instant Payment will mean for your organization?
Come to our next open training (March 15 in Utrecht) or inquire about the possibilities of an in-house training.
More information at: www.paymentsadvisorygroup.com.
If you have any questions please contact us via: [email protected] .

 

Boudewijn Schenkels

Senior Consultant Payments @ Payments Advisory Group

 

 

4 financiële problemen die bedrijven in gevaar kunnen brengen

| 19-12-2016 | Schenkels | Pavey |  FM.nl |

bankrupcyOp FM.nl (Financieel Management) kunt u een artikel vinden over de vier financiële problemen, die de continuïteit van een bedrijf in gevaar kunnen brengen. Dit onderwerp werd uitvoerig besproken tijdens een opleiding risicomanagement van Alex van Groningen.

Het artikel gaat uitgebreid in op de vier problemen. Hier volgt een korte samenvatting:


1. Acuut probleem (illiquiditeit)

Bedrijven gaan vaak failliet, omdat ze geen cash meer hebben. Het gaat mis als er onvoldoende cash is om aan kortlopende financiële verplichtingen te kunnen voldoen. Met het werkkapitaal kunnen zich verschillende problemen voordoen:
● De hoeveelheid vlottende activa als percentage van de balans loopt te hoog op.

● Het probleem van onbeheersbare groei: vanwege snelle groei loopt de debiteurenpost te snel op.

● Wanneer een economische crisis uitbreekt, zoals de kredietcrisis van 2008, wordt liquiditeit schaars.

● Het grootste probleem ontstaat wanneer de cashflow snel daalt bij een achterhaald businessmodel terwijl de kosten/verplichtingen grotendeels hetzelfde blijven.

Je kunt werkkapitaal beoordelen met verschillende kengetallen: current ratio, quick ratio en netto-werkkapitaal. Echter, deze getallen zijn beperkt betrouwbaar omdat het momentopnamen zijn.

2. Chronisch probleem (organisatie is onrendabel)

Een onderneming kan jarenlang verlies lijden, maar toch blijven voortbestaan zolang er maar geld is. Wanneer de geldkraan wordt dichtgedraaid door de kredietverstrekker kan een chronisch probleem ineens een acuut probleem worden. Dit geldt bijvoorbeeld voor veel retailketens op A-locaties, die vanwege de enorme impact van internetwinkelen onrendabel werden. Terwijl de omzet per winkel terugliep bleven de vaste lasten, zoals huur, salaris en afschrijvingen, gelijk.

3. Structureel probleem (insolvabiliteit)

Van insolvabiliteit spreek je wanneer er iets mis is met de vermogensstructuur van een onderneming. Hoe hoger de leverage – het vreemd vermogen – hoe lager de solvabiliteit. Het aantrekken van meer vreemd vermogen is niet per definitie verkeerd. Het kan ondernemingen in staat stellen te investeren en te groeien. Maar omdat het geld kost aan rente en risico’s met zich meebrengt moet er wel meer rendement tegenover staan.

4. Strategisch probleem (toekomstplannen)

Een onderneming heeft een strategisch probleem wanneer het management niet goed in zicht heeft hoe de markt veranderd en hoe de onderneming haar toekomstplannen daarop moet aanpassen. Dit probleem kun je niet uit de boekhouding halen. Volgens docent Jan Vis, een autoriteit op het gebied van waarderingsvraagstukken, is het van het allergrootste belang dat het management zich focust op het vergroten van de toekomstige geldstromen, want waarde ligt altijd in de toekomst en in het genereren van cash (geen winst).

Wij hebben twee van onze experts gevraagd om hierop commentaar te geven:

Boudewijn Schenkels:
De meeste bedrijven in problemen zijn inderdaad afhankelijk van overnames of te afhankelijk geworden van de standaard financieringsproducten van banken. Hoe langer hun financiële crisis voortduurt hoe eerder de bodem van de kas in zicht komt. Er wordt (nog) niet of te weinig gedacht aan de alternatieve onorthodoxe vormen zoals bijvoorbeeld crowd-funding. Banken worden hier steeds creatiever in en er ontstaan steeds meer netwerken. Out-of-the-box vormen die alle 4 de probleemgebieden kunnen tackelen of beheersen. Ook kom ik ook nog steeds bedrijven tegen waar vastgehouden wordt aan oude structuren in het kader van cash management. In het post-SEPA tijdperk zijn lijnen korter en is betalingsverkeer meer transparant en ontstaan er nieuwe producten. Om te komen tot deze nieuwe vormen is een afwijkende strategische visie nodig vanuit management. Streef er constant naar onderscheidend en denk na over hetgeen er verder in de wereld aan de hand is dat er onverwachte wendingen ontstaan. Kijk naar de politiek.

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Boudewijn Schenkels 

Senior Consultant Payments  bij Payments Advisory Group

 



Lionel Pavey:
Hij reageert op het probleem illiquiditeit: Er zijn 2 stromen waar geld vaak vast zit – voorraden en debiteuren.

Voorraden
1)     Plan de hele cyclus van levering tot verkoop

2)     Hoe lang is de levertijd

3)     Hoeveel ruimte nemen de goederen in beslag en heb ik genoeg ruimte

4)     Zijn de voorraden snel bederfelijk

5)     Hoeveel leveranciers zijn er

6)     Zijn de goederen seizoensgebonden

7)     Implementeren van “just-in-time” methodiek

Debiteuren
1)     Facturen tijdig en correct versturen

2)     Controleren en vermelding van juiste voorwaarden

3)     1 week na verzending controleren dat facturen zijn ontvangen bij debiteur

4)     Bevestig met debiteur dat alle gegevens correct zijn

5)     Bevestig met debiteur dat betaling vindt plaats op afgesproken datum

6)     Alle contact met debiteur ten eerste via telefoon, daarna via email

7)     Implementeren van een solide debiteurenbeheer

8)     Altijd proactief actie ondernemen – niet wachten op debiteur

9)     Laat verkoop afdeling weten de stand van zaken, maar laat verkopers nooit direct met klanten praten/onderhandelen over openstaande posten

10)  Zorg voor alle nodige vaste gegevens van een debiteur – contact persoon, hoofd crediteuradministratie enz.

11)  Uw klant is ook een mens – als een klant wordt op de hoogte gesteld van openstaande posten, dan realiseren zij dat U een goede beheersing hebben van alle organisatorische  aspecten

Lionel Pavey

 

Lionel Pavey

Cash Management and Treasury Specialist – Flex Treasurer

 

 

 

 

 

Instant Payments deserves a quick adoption because it will reduce the costs and will benefit Corporate Treasury: education will give a boost.

| 25-11-2016 | Boudewijn Schenkels |

payments

 

Several use cases, like in UK and Australia, implementing Instant Payments proved to be a alternative to checks, cash and debit cards for retail and corporate customers, stated in the World Payments Report 2016 by CapGemini and BNP Paribas. Besides replacing these expensive payment types, Instant Payments will mean extensive benefits for Corporate Treasury.

To boost the adoption of immediate payments, efforts are required in a number of areas including value-added services development, education of the main stakeholders, and upgrading of merchant and corporate infrastructures”.

For education matters the Payment Report advises the marketplayers (banks, industry organizations, and regulators) to invest in educating key stakeholders including corporates, merchants, and end-customers on the benefits of instant payments. “For example, banks could inform corporates and merchants of the required infrastructures, the ease of transaction, benefits including instantaneous funds and receipt, and how instantly available funds can be better managed.”

Treasury Benefits are specified as:

1. Payments can be initiated at last moment before due date leading to:
– Reduced settlement times and availability of funds for longer durations
– Enhanced liquidity management
– Cost savings as a result of fewer adjustments
2. Implementation of Instant Payments will lead to improved financial control and budgeting for Corporates due to certainty of payment status (irrevocable);
3. Real-time systems generate data, which will help treasurers map companies’ cashcows and financing operations with their stakeholders’ production lines in real time, which will make cashflow easier to manage and forecast;
4. The instant payment finality of Instant Payments reduces credit risk and the temporal risk created by time delay between payment and settlement. This enables instantaneous updates and a constant real-time view of cash positions for corporate clients;
5. Instant payments are expected to enhance the experience of corporates’ customers by providing faster services, real-time notifications, and immediate availability of funds.

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Boudewijn Schenkels

Senior Consultant Payments @ Payments Advisory Group

Instant Payments: major innovation ahead! How fast is “the new normal”?

| 07-09-2016 | Boudewijn Schenkels |

Imagine it will be possible to transfer money within several seconds from any bank account to another bank account. 24 hours a day, 7 days a week. It will open large business opportunities enabling many innovative payments use cases.

After the introduction of SEPA the market is ready for further innovation. New payment laws (PSD2) make the payment market more competitive and new payment providing parties are anxious to participate. The continuous development of the ‘always on’ economy drives the need for faster and 24/7 payment execution.

According to the European Retail Payment Board (ERPB), an instant or immediate payment is an electronic (retail) payment solution, available 24/7/365 and resulting in immediate interbank clearing of the transaction and crediting of the payee’s account with confirmation to the payer within seconds of payment initiation, irrespective of the underlying payment instrument used and arrangements for clearing. Basically: sending and receiving payments 24/7 within seconds. National instant payment solutions have already been successfully launched in a number of European countries, such as Denmark, Poland, Sweden and the UK.

The SEPA Instant Payment, based on the SEPA Credit Transfer, can be offered in SEPA by November 2017; with the Rulebooks for this so called SCT Inst scheme becoming available in November this year. Some communities will offer Instant Payments from the start, others will follow later, but not offering Instant Payments doesn’t seem to be an option. Various other countries, including The Netherlands, Belgium, Spain and Italy, are running programmes to deliver Instant Payments to their communities in the coming years. The major Dutch banks have committed themselves to deliver Instant Payments, or what they call: “the new normal”, by May 2019.

Instant Payments in itself will offer new interesting payments use cases, but it will certainly serve as a platform to support many new innovative payments services.

Impact for Treasurers and Cash managers

For treasurers and cash managers there will be large changes as well as opportunities. For a long time banks have provided cash pooling solutions to their customers, but Instant Payments will allow to sweep accounts at any time to enable efficient cash pooling and distribution eventually throughout Europe.

Another few examples of these “future” use cases are:

  • Pay upon delivery (car purchase, market place transactions) every hour of the day
  • Enabling of cash transactions replacement
  • Instant Pay-out of Insurance payments: in case of a calamity an immediate pay-out and availability of funds can be very beneficial for consumers;
  • Instant lending: propositions where loans can be granted in near real time the pay-out can be done instantly providing the customer with access to the funds immediately
  • Notary payments: immediate transfer of funds also in the weekend
  • Request for Instant Payment: request a payment and get payed immediately when authorised
  • Time critical or “just in time” business payments: the greater transparency in a SEPA Instant Payment (within seconds it is either successful or not) will enable businesses to pay and be paid on delivery (e.g. shipping, delivery of goods, etc.), or to settle fees such as tax, port fees etc. associated with a cargo to enable its release
  • It can replace some urgent payments services
  • Late cut-off times for SEPA batch payments by re-using Instant Payments: if a service is introduced that converts batch SEPA Credit Transfer payments into Instant Payments businesses can profit from the 24/7 instant character of Instant Payments without major changes to their payments environment; depending on the size of the batch and the capacity of the instant payment infrastructure batch payments can be executed in minutes or in a few hours and out of business hours; it allows business to pay later, pay on a specific day of the month and increase liquidity
  • Instant Direct Debit: an Instant Direct Debit would combine the advantage for businesses of having instant clarity of the payment succeeding and receiving funds, for instance last minute lottery ticket

You will say, “too good to be true”, but they are all in scope for “the new normal”. I would like to say: be aware of all the changes and business opportunities for your organization and prepare yourself!

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Boudewijn Schenkels

Senior Consultant Payments @ Payments Advisory Group