INSTANT PAYMENTS
As Europe is settling into the era of SEPA transactions, STET is implementing a new CSM in order to
process Instant Payment transactions. This is part of our pan-European strategy to deliver efficiencies to
participants through our CORE payments platform.
The world of payments is moving forward: increasing the speed at which payments are processed is one
objective many are enthusiastic about. Instant Payments will impact all, whether consumers, businesses or
governmental institutions, and create opportunities for innovation.
STET’s new pan-European IP CSM fits right in and will be open to individual PSPs (or organised within a
community of PSPs). Enrolled participants get a significant competitive edge: through their single access
to the CORE payments platform, they will be able to reach all other participants, regardless of whether
they belong to the same community or are connected to the same CSM.
Our IP CSM will be fully compliant with the EPC SCTinst rulebook as well as implementation guidelines.
It will be hosted in a highly secure and robust real-time 24/7 infrastructure purposely built for Instant
Payments.
This faster type of payment will act as a catalyst for the convergence of existing means of payments and
over time may become the new normal. With this in mind from the outset, STET designed its new IP CSM
specifically for handling SEPA-scale capacity in a dedicated environment focused on performance and
real-time messaging.
In support of local consumer requirements, our applicative design also takes into account possible
variations at community level such as maximum amount of payment, end-to-end timing and field
validations. Our CSM can support these variants through community CUGs within the SCTinst scheme.
Our IP services will include the latest technology components to offer functionality such as on-line treasury
liquidity management, liquidity projection tools and transaction tracking, which will be delivered through
our GUI and A2A interface.
Banking services using the SCTinst scheme will benefit from technology in order to deliver instant
movement of funds. This in turn will introduce new challenges in terms of security and risk mitigation. In
this respect these together with fraud mitigation and data protection are at the top of our agenda.
3
Instant Messaging 24/7
architecture
Facilitating 24/7 messaging through the SCTinst scheme will require efficiency, robustness and security
from the infrastructure designed to process such transactions.
The introduction of Instant Payments messaging challenges existing CSMs that are to provide SCTinst
clearing services: with an end-to-end target processing time of 10 seconds or less within which the
clearing and settlement infrastructure cannot claim more than 1 second for its own processing, a major
transformation will be imperative.
Such a transformation will implicate moving from batch payments to single messages, from clearing cycles
to instant 24/7, all of which takes us closer to the world of card processing: indeed, the use of single
messages and instant messaging 24/7 has been the day-to-day operational card processing model for
many years.
In addition to the required investments needed to implement an Instant Payments real-time CSM, a high
degree of expertise is required to design a real-time infrastructure as well as a high level of experience to
manage the instant operations thereafter.
Following the recent merger of STET and SER2S, operator of the card authorisation network in France, the
new STET is very well positioned to deliver and operate our Instant Payments CSM.
We will be leveraging the expertise and experience from our cards operations teams as well as
components from our existing real-time 24/7 messaging architecture in order to deliver a state-of-theart Clearing and Settlement system for Instant Payments with an initial capacity for 3,000 transactions
per second. This number will evolve as work is under way to increase the CSM scalability up to 20.000
transactions per second.
4
Access for
Direct Participants
STET’s IP CSM will be open to all PSPs active in the SEPA having adhered to the EPC SCTinst scheme
and meeting the criteria to be established for accessing and participating in the service.
Strict access is recommended, particularly with respect to ensuring the level of readiness of a PSP to
take part in the system vis-a-vis other participants, as well as implementation of business continuity to
ensure continuity of service 24/7/365.
PSPs meeting the criteria to become direct participants will be able to connect to the Instant Payments
solution using a network provider of their choice.
STET recommends the use of Multi-Protocol Label Switching (MPLS) services which offer a secured
layer of encryption to transport messages, a reachability check of participants as well as European-wide
coverage. They also guarantee a high level of security, troubleshooting and a high quality of service.
Once connected to a network provider, direct participants will be able to access STET’s in-house
gateway, the sBoX, using dedicated links.
The sBoX is offered in two packs:
- The Single Connectivity pack with one sBoX connected to the network provider
- The Dual Connectivity pack, which is strongly recommended for a resilient architecture with
24/7/365 availability. A redundant set of 2 sBoX will allow both gateways to manage active/active
links.
STET is committed to offering the best suited connectivity options in order to facilitate secured Instant
Payments processing along with guaranteed settlement 24/7/365.
5
Orchestrating
the Message flow
The SCTinst payment transaction is defined in the EPC rulebook, where the scheme further defines the
end-to-end time allocation for the execution and confirmation of the payment.
From an infrastructure point of view, the payment message will be supported by a number of additional
technical messages exchanged between the originator PSP messaging and network infrastructures, the
central CSM and the beneficiary PSP messaging infrastructure: these messages can be payment files,
confirmation messages, acknowledgments.
The central CSM architecture added value lies in its role as a message flow orchestrator: the CSM enables
various types of messages to be exchanged and is in the position to act on schedule thanks to the
timestamp included in the file being processed. The reconciliation process of all exchanged messages
allows the central CSM to know at all times, and in millisecond precision, the location and status of the
payment message.
STET’s IP CSM will provide its participants with instant visibility of all transactions in the system and will
implement real-time information services to provide participants with the status of transactions at all
times. The CSM will offer a manual option as well as an integrated one for message flow queries: a User
Interface accessible via an Internet browser, which will allow the PSP to monitor their transactions through
dashboards, to explore and search transaction data and statuses; an application-to-application interface
which will provide real-time querying capabilities.
6
Instant Clearing
based on Mirror Accounts
The SCTinst scheme plans for instant crediting and availability of funds by the beneficiary within 10
seconds in a normal situation. In addition, the scheme highlights that the transaction processing should be
executed end-to-end in a risk-free fashion.
The instant clearing service that will support the SCTinst should offer new functionality and features to
allow Instant Payments to be exchanged between CSM participants without counterparty or settlement
risk. It should also provide real-time visibility on the liquidity position of each participant and offer
mechanisms to manage the liquidity placed by each participant to ensure settlement.
STET’s Instant Payments service will implement individual PSP mirror accounts within the CSM reflecting
the value of the pre-funded amounts placed by each participant at the ECB to cover its clearing
obligations.
Based on these pre-funded mirror accounts, STET can perform Instant Clearing of the transactions sent
into the system on a multilateral net basis.
Our next generation Web services will deliver a graphical view of the system for each participant. Through
a new series of alert messages, participants will be notified when their parameter-based minimum level of
liquidity is reached. These messages will be offered through application-to-application (A2A) interfaces for
integration into the PSP’s information system.
STET’s commitment is towards delivering a modern CSM that will meet and exceed market requirements
for instant clearing.
7
Settlement
in ASI6 integrated
Clearing and Settlement of SCTinst transactions will evolve from the traditional CSM multi-cycle clearing
and settlement model operational today.
As regards Instant Payments, PSPs will be required to pre-fund liquidity in the TARGET2 CSM ASI6
technical account so that the transactions may be sent for clearing. In combination with the PSPs’ mirror
accounts, the CSM will be able to provide clearing and final settlement to positively confirmed transactions
within seconds and on a 24/7 basis.
A settlement guarantee is put in place in order to further secure the Instant Payments processing: based
on individual guarantees that can be extended outside business hours, participants’ settlement obligations
are a major focal point of STET’s IP CSM.
Our integrated clearing and settlement solution for Instant Payments will build on the mirror account
functionality to provide alerts through a GUI and A2A messaging so that treasurers can manage their
liquidity positions. Alert thresholds can be set on a minimum and maximum % of liquidity held by a PSP.
The solution also offers an interactive messaging interface to our IP CSM aimed at PSPs that need to add
liquidity and recover excess liquidity through TARGET2 as required.
The treasury tool will further deliver liquidity projection tools based on algorithms and historical data.
We consider it our main mission to act as the trusted party at the centre of interbank clearing and settlement.
8
On-line Information
Services
Our Instant Payments CSM will support PSPs through state-of-the-art information services available on our
Graphical User Interfaces (GUI) and via Application to Application (A2A) messaging for easy integration
into PSPs’ back office and treasury systems.
Our on-line information services will provide PSPs with a real-time view of their activity 24/7/365 in the
system from an operational management and liquidity management perspective.
Instant Payments need to be supported by CSM on-line services.
STET provides secure and operationally robust service to PSPs that can rely on us to deliver their
innovative services to the market.
NUMBER OF INSTANT PAYMENTS
PROCESSED
amount OF INSTANT PAYMENTS
PROCESSED
K€
50000
800000
40000
600000
30000
Confirmed
20000
Confirmed
400000
Rejected
Rejected
200000
10000
0
0
Confirmed
Rejected
Confirmed
Rejected
NUMBER OF IP PROCESSED
by amount
availability
rate
30000
100%
< 20 €
25000
> 20 and < 100 €
80%
20000
> 100 and < 1000 €
60%
Availability
40%
Unavailibility
15000
> 1000 and < 5000 €
10000
> 5000 and < 10000 €
20%
5000
> 10000 €
0
0%
NUMBER OF rejected ip
by reason
700
DP
Bank A
IPDTA
Bank B
IPDTA
Bank C
IPDTA
Bank D
account
position
600
Daily
K€
2 000
500
400
0
300
-2 000
200
-4 000
100
-6 000
0
3:30
5:00
0:30
2:00
7:30
8:30
9:00
6:00
1:30
4:30
3:00
1:00
2:30
-8 000
0:00
Exceeding
SLA
9:30
Invalid
certificate
6:30
Duplicate
sending
8:00
Unknown
message
format
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Indirect Participants with
Direct Technical Access (IPDTA)
Our Instant Payments CSM introduces a challenge to the traditional representation model of clearing
systems: in the new model we are offering, Direct Participants will be able to represent Indirect
Participants.
The real-time interactive messaging of Instant Payments with end-to-end exchanges measured in seconds
may prove very difficult within a Direct Participant / IP scheme.
Based on existing functionality in our CORE system, STET offers an innovative solution for Indirect
Participants through our IPDTA service. It allows a Direct Participant to share their Instant Payments direct
connectivity to CORE IP CSM which provides real-time messaging with transactions being instantly cleared
against the Direct Participant’s sub-mirror accounts in the system.
The Direct Participant retains overall control of the liquidity position and allocates liquidity capacity to their
Instant Payments.
The model can be further used by Direct Participants for group participation in CORE IP CSM. A multicountry bank can operate directly from different countries but draw from a single liquidity position in
TARGET2.
STET delivers operational and liquidity efficiency to PSPs through innovative services.
Direct participant
Direct participant
Direct participant
IPDTA
Indirect participant
IPDTA
Direct and IPDTA
participant account
DP
Sponsor
account
DP
DP
IPDTA
account
Sponsor is the
settlement
bank
IPDTA
account
Limits are
configured for
DP and IPDTA
account
IPDTA
IPDTA
account
CORE IP
Scheme participants
DP : Direct Participant
IPDTA : Indirect Participant with Direct Technical Access
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Value-Added Services
Our Instant Payments CSM emerges as a new generation infrastructure ready for today’s reality and
provisioned for future evolutions. CSMs rapidly need to evolve from traditional non-urgent batch clearing
to real-time single transaction clearing.
The speed of exchanges also reduces the time available for PSPs to execute the necessary risk controls.
As trusted partners in the interbank exchanges CSMs can accordingly play a key role in providing risk
mitigation services such as transaction scoring for fraudulent transactions.
New consumer behaviour such as expectation for fast reach in P2P payments, addressing the beneficiary
through different identifiers e.g. mobile numbers or email addresses, highlights the need for central
services and the benefits of collective, shared solutions for the account servicing PSPs.
STET plans to implement two new services for PSPs in support of instant payments.
Fraud Scoring
Instant Payments will be used for e-commerce by consumers for the payment of on-line purchases of
goods and services. This payment method would be an alternative to a payment with a card; it will be a
question of choice. It is to be expected that both consumer and merchant will want the same level of risk
mitigation offered today in the cards world, that is to say that transactions are scored on real time by the
operator for possible fraud through validation against sophisticated algorithms.
STET will implement an Instant Payments fraud scoring service based on our cards scoring system
operating today for over 6 billion transactions a year and which has delivered savings to PSPs of 60 €
million per year through fraud detection.
Proxy Database
STET plans to implement a proxy database which, in the pre-transaction stage, will allow PSPs to consult
the database in order to ascertain the beneficiary’s BIC and IBAN from a given mobile number or email
address. The transaction is subsequently presented by the PSP for clearing in the IP CSM.
The service will include enrolment, administration, interaction with unknown addressees and other
supporting functionalities.
11
www.stet.eu
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