Launching SEPA Instant Credit Transfer in your existing CBS architecture

The regulatory obligation in Europe making the reception and sending of SEPA Instant Credit Transfer (SCT Instant) mandatory is soon to become a reality for banks and fintechs. At Numeral, we have extensive experience in connecting our customers to the interbank instant payment network with millions of payments taking place in production.

This blog is inspired by our experience in working around the sometimes complex existing internal CBS architecture, the challenges we observe, and how we support in complying with regulatory requirements.

We will explore how banks and fintechs can implement SCT Instant without having to overhaul their CBS architecture and systems.

SCT Instant, in a nutshell

Instant payments are electronic transactions processed in real-time, 24/7, 365 days a year. Funds are made available immediately (within 10 seconds) and irrevocably to the recipient. SCT Instant is the first pan-European instant payment method, launched by the European Payments Council (EPC) in 2017. This initiative aims to make instant money transfers efficient and ubiquitous across the Eurozone. Failure to comply with SCT Instant will result in sanctions.

Key deadlines and requirements

The transition to mandatory SCT Instant payments will occur in several phases for EU countries, categorized by type of financial institution and whether they are in the Eurozone or not.

There are three main groups of requirements concerning instant payments: supporting SCT Instant payments, screening of entities and individuals, and Verification of Payee (VoP). These requirements gradually become mandatory starting on 9 January 2025. While the specific sanctions for non-compliance are not yet clear, they will likely result in penalties for institutions that fail to meet these requirements.

For detailed information about SCT Instant regulatory framework, refer to our guide: The Guide to SEPA Instant Credit Transfer and Numeral’s blog on PSD3 and IBAN verification.

Is your CBS architecture real-time 24/7/365?

The shift to SCT Instant payments presents challenges, particularly for banks, PIs and EMIs with legacy core banking systems (CBS). Traditional CBS architectures were not designed for real-time 24/7 processing, and typically have some mandatory downtime for maintenance and end-of-day processing.

Key challenges for complying with SCT Instant regulations

1. Real-time payment processing.

Payments must be processed and funds made available to the beneficiary within 10 seconds end-to-end, from the initiating financial institution to the receipt of the approval or rejection by the payer.

2. Real-time Notifications.

The initiating entity needs to notify the originating party that the funds have been successfully delivered to the beneficiary within the 10-second processing window.

3. Verification of Payee (VoP).

VoP will be required on all SCT payments, including SCT Instant, even if the payer is sending a payment to a pre-registered, whitelisted payee. This requires the ability to query payee information from the scheme or a third-party vendor solution to perform the verification before the customer initiates the transfer.

4. Screening of entities and individuals.

Although sanctions screening is not required in real-time for incoming and outgoing SCT Instant, entities will be required to screen their customers on a daily basis. This ensures that the originating party of an SCT Instant will have been screened within the past 24 hours, limiting the likelihood of SCT Instant payments being sent by individuals on sanction lists.

Sanctions screening is typically done using a fraud and compliance solution. A daily, 365-day-a-year process will be needed to ensure that the originating party reference information is updated as soon as the sanction screening has been performed, blocking the possibility of initiating an SCT Instant payment in case of a screening match.

5. Non-mandatory real-time risk management.

Although not mandatory, some financial institutions may want to ensure their level of fraud screening and checks is also applied to incoming and outgoing SCT Instant payments in real-time. For example, EU regulations do not prevent EU entities from screening originators and beneficiaries against non-EU sanction lists, which could be an internal requirement for non-EU companies with payment activities in the EU.

Numeral: SCT Instant without overhauling your CBS architecture

With Numeral’s modular product offering and flexible integration, it is not too late to comply with upcoming SCT Instant regulatory requirements. Numeral can help banks and fintechs implement SCT Instant in a matter of weeks, not months or years, without completely overhauling their legacy CBS architecture.

We have designed an SCT Instant offering to satisfy the key requirements of complying with SCT Instant regulations for core banking CBS architectures that do not support real-time or zero downtime processing.

Incoming SCT Instant

Numeral fully manages the connectivity with your sponsor bank’s SCT Instant payment infrastructure, handling the reception of incoming SCT Instant in real-time from validation to notification to your customer.

Validation:

• Validate the incoming SCT Instant.

• Check the existence and validity of the beneficiary account either by: 1/ Querying the reference data from your CBS architecture in real-time or 2/ synchronising this data into Numeral periodically (if the reference data can’t be queried in real-time).

Fraud and Compliance:

• Perform optional fraud and compliance checks through real-time orchestration with fraud and compliance tools.

Confirmation:

• Confirm the incoming SCT Instant so that the originating party receives their notification of reception within the regulatory 10-second window.

Customer notification and availability of funds:

• Send the SCT Instant to your channels solution so that the customer is notified and the payment is made available to them in real-time.

• Depending on whether the core ledger supports real-time or not, credit the funds to the customer’s account in the core ledger in real-time or periodically using the required interfacing method.

Outgoing SCT Instant

Similarly, Numeral fully manages the connectivity to the sponsor bank’s SCT Instant payment infrastructure, handling the sending of outgoing SCT Instant in real-time:

Fraud and compliance:

• Perform necessary fraud and compliance checks in the existing CBS architecture before the payment is initiated through Numeral for real-time processing.

• As an option, Numeral also offers the possibility to orchestrate real-time fraud and compliance checks.

Initiation and validation:

• Initiate an SCT Instant using our RESTful API.

• Validate the SCT Instant in real-time before sending a scheme-compliant message to the sponsor bank.

Recipient validation:

• Numeral can perform optional IBAN-name and reachability checks in real-time if not available in the existing CBS architecture

Notification:

• Integrate the mandatory notification of reception by the beneficiary within the regulatory 10-second window through our event-driven webhooks.

Numeral: SCT Instant payment gateway and scheme compliance

Numeral can facilitate deploying SCT Instant payments by providing an SCT Instant scheme-compliant payment gateway that can be easily implemented within your existing architecture.

By routing SCT Instant through Numeral, it can fully manage the complexity of real-time interactions with the scheme, allowing the existing CBS to operate efficiently without any modifications:

• Numeral can orchestrate the real-time processing by interacting with the channels for incoming and outgoing SCT Instant, customer notifications, and virtual/real-time customer balance credit/debits. 

• It also provides a real-time orchestration with a fraud and compliance solution for mandatory and optional fraud and compliance checks. 

• Numeral can queue virtual real-time customer credit/debit to send to the CBS core ledger when the system is online and available.

Comply on time

The transition to mandatory SCT Instant payments is a significant milestone for European payments and will result in sanctions for non-compliance. Numeral offers an easy-to-deploy, quick time-to-market, bank-grade solution to comply with key SCT Instant deadlines and milestones without needing to overhaul your existing CBS architecture.

To explore how Numeral can help you implement SCT Instant in your current CBS architecture, visit contact us to organise a meeting with our solutions engineering team.