Isabelle Olivier, head of initiatives & market infrastructures, EMEA at Swift set the scene, noting that payments infrastructure is changing faster than ever, driven by customer demands, challenger companies entering the arena, and rapid technological development. MIs are reacting to this change by taking steps to make payments faster, cheaper and safer.

MIs are a key pillar for Swift and for the Swift community, as the 8000 banks that are connected to Swift use this connection not only to exchange payments between each other in the correspondent banking space, but also to access more than 300 MIs globally.

Olivier noted the importance of MIs in cross-border payments, commenting that as MIs have enabled the functionality of Swift gpi, 35% of cross-border transactions now have at least one leg in the MI space, usually the first or last leg.

“Market infrastructures are renewing and redesigning their systems to foster greater openness and enable new services, such as instant payments," Olivier said. "To realise these benefits, a modern data standard is required that is data rich, ensures consistent interpretation and is widely accepted across the financial ecosystem. ISO 20022 fulfils these needs and is therefore a common element of infrastructure renewal projects.”

"Market infrastructures are front runners in adopting ISO 20022, both in Europe and across the world," she continued. "By 2025, over 80% of RTGS flows will be on ISO 20022. Market infrastructures are driving this."

Looking ahead, Olivier commented that payment MIs are a catalyst for change, saying that MI links with, and access to, non-banks could really shake up the market going forward.

The view from the ECB

While much has been achieved to enable seamless and frictionless transactions across Europe, Dimitri Pattyn, the ECB's deputy director general, market infrastructure and payments, shared a photo of the bill he received at a recent family brunch in Frankfurt to illustrate there is still a way to go. The bill from the restaurant stated that they would only accept cash or PayPal, so anyone that didn't have PayPal or enough loose change in their pocket would have to run out to an ATM, not exactly seamless or instant.

Pattyn cited an insufficient uptake of SCT Inst, operational since November 2017, as one example of work remaining. Also, there is an absence of pan-European card scheme - a SEPA for cards.

"Card payments are the fastest growing payment means in recent years, but this growth is taking place with a multiplicity of domestic card schemes, or international card schemes on proprietary technology," Pattyn commented.

To achieve full reachability of instant payments to all payments services providers (PSPs) across Europe, Pattyn explained the two main measures taken by the governing council

The first measure is that all PSPs which have adhered to the SCT inst scheme, and that are reachable in Target2, must also become reachable in TIPS, either as participants in TIPS, or as third parties. The second measure, which is taking place at the same time, is that all ACHs offering a payment service will migrate their technical accounts from Target2 to TIPS.

"This will create a space where PSPs can decide to be either a participant directly in TIPS, or to be participants with their preferred ACH - there is no change in that respect - but with a guarantee that any payment that is involving another PSP in Europe, and possibly up to two ACHs, will be successfully executed instantly and actually independently of the choice of the other PSP," Pattyn said, arguing that those two measures can make instant payment the new normal in the Euro area.

Assessing the state of play with MIs and banks

In a panel discussion among representatives from MIs and banks that followed, Jose-Luis Langa, deputy managing director, international & business development at Iberpay, took slight issue with the second measure Pattyn had outlined.

"It is difficult to understand why we should move the settlement from Target2, which is working perfectly, to TIPS," Langa said. "This change brings a lot of uncertainty. There is uncertainty on the timeframe to do so - all of the documents to make this happen will be available late in April and the change should be done in November. There is uncertainty on the TIPS pricing - the ECB recently announced that this will be released early December. With these uncertainties, I don't see the real benefit for the community."

Hays Littlejohn, CEO of EBA Clearing, had some sympathy for this position.

"For those particular business participants that are in more than one CSM for instant payments, this could help them manage their liquidity," Littlejohn said. "So it could be helpful, but it's going to be expensive and challenging to get that done. It's not clear what the pricing is going to be or how ACHs or CSMs can cover the costs on that, because that's been relatively significant investment."

Considering the transition to ISO 20022, Paula Roels, head SWIFT & market infrastructures, cash management at Deutsche Bank, highlighted the opportunities this creates for banks and their clients.

"Many of us are taking this chance to run it more as a strategic transformation programme from front to back," Roels commented. "We all acknowledge that rich and structured data will improve the quality of payments and provide flexibility. However, the full benefits will only be actually realised once all active in the payment chain are taking it seriously as well. The biggest benefit is going to be for the corporates, when they start adopting the ISO 20022, both at the point of initiation and even more importantly for reporting. With reporting, we can actually provide them this rich and structured data, finally addressing the pain point of reconciliation."

Looking ahead, Vincent Brennan, head of group payments & BCM at Bank of Ireland, commented that the breadth and speed of innovation in the MI space really highlighted the importance of interoperability.

"The level of innovation and transformation going on at the market infrastructure level is huge," Brennan said. "Each of the players is transforming away from what was a very straightforward core set of activities, into more value added ones. The interoperability agenda will become really critical over the next few years."