The Single Euro Payments Area (SEPA) Instant Credit Transfer (SCT Inst) scheme went live in November 2017, and it’s gradually being rolled out throughout Europe. The scheme enables instant payments between European IBAN accounts in under 10 seconds, both domestically and across SEPA borders. These instant payments will be available to businesses and consumers 24/7.
For businesses of all sizes, SCT Inst promises a number of benefits—including the ability to accept payments and ship goods to customers faster, better control of your liquidity and cash management, and the chance to streamline your business operations. It may even lead to new business models.
But as with any big change, it pays to be prepared. In this article we look at what your company should do to prepare for the introduction of SCT Inst, and how to get the greatest advantage from instant payments.
1. Plan your long-term treasury functions
If you’re attempting to centralise your treasury, make it more cost-effective, mitigate risks or improve customer satisfaction, it’s always important to think about what the future may bring.
When the normal SEPA credit transfers went live in 2008, many companies made large investments in overhauling their treasury functions. “A lot of businesses saw it as an opportunity to optimise their cash management and plan for future growth,” says Tino Kam, Head of Payment, Liquidity Cash Management and Corporate Channels, Nordea.
“My advice to corporates is that if you’re making these investments in your treasury now—remember to factor instant payments into your plan,” says Kam. “Don’t just think about the immediate future for your treasury; think about the world in 3 to 5 years’ time, and the important role that instant payments will play in your processes.”
In his role at Nordea, Kam has had many conversations with customers about treasury optimisation—and instant payments are an increasingly important factor in these discussions. “We help customers to make sure their treasury setup is fit for purpose, and to prepare for a future where instant payments are mainstream,” he explains.
Don’t just think about the immediate future for your treasury; think about the world in 3 to 5 years’ time, and the important role that instant payments will play in your processes.
2. Consider the customer experience
As with any major change, it’s also crucial that you consider the impact on your customers. Kam says this will vary widely depending on your business size, industry and customer needs. “I think instant payments will become the primary method in certain business areas, such as e-commerce. Anything you buy on your mobile or online will be instant,” Kam says. “But the expectations of your customers will vary depending on your business and industry.”
“For example, an insurance company could send customers an SMS as soon as they receive a claim payment in their account. Or a car dealership could accept instant payments from their customer’s loan provider, allowing the customer to take home their new vehicle that day.”
You should also think about how the new scheme could streamline your supply chain. Imagine you’re a retailer that imports goods from another EU country. When a customer makes a purchase, you could make an instant payment immediately to the supplier—allowing them to ship to the customer directly and eliminating the need for stockrooms. Not only could this increase customer satisfaction, it would also reduce the amount of working capital you have tied up in stock.
“In many different ways, instant payments will enable better end-to-end customer journeys,” says Kam. “Invest in planning and look at your customers’ experience from all angles so you don’t miss valuable opportunities.”
3. Choose a provider that’s onboard
For large corporations, it’s important to work with a provider that can offer harmonised support and integrated solutions in your region—or anywhere that your business operates. “You need to understand how you’re going to standardise your solutions across your different banks and countries,” says Kam.
It’s also important to note that SCT Inst is a voluntary scheme, so some banks will adopt it sooner than others—and others won’t offer it at all. “Although more and more banks will adopt SCT Inst in 2019, I do think full reachability will only happen from 2020 onwards. In certain countries you won’t have 100% reach for some time,” says Kam.
That means it’s important to work with a bank or service provider that offers SCT Inst in your region—at least if you want to reap the benefits early. At Nordea we’re committed to being an early provider of SCT Inst throughout the Nordics. We plan to integrate it with other innovative solutions—including our virtual account management and open banking initiatives.
“I think open banking will be a gamechanger,” says Kam. “We don’t just see it in terms of PSD2 compliance, we see it as a cultural and mindset change—at least from a payment service offering perspective. And Nordea wants to be a frontrunner in this. We don’t just want to be an aggregator—we plan to innovate with our partners, fintechs and other companies to create better payment solutions for our customers.”
With special thanks to: Tino Kam, Head of Payments, Liquidity Management and Corporate Channels, Nordea
For more information write to Tino Kam at tino.kam [at] nordea.com (tino[dot]kam[at]nordea[dot]com) or check out Nordea’s payment services