What the Launch of SIC5 Instant Payments Will Mean for Switzerland

What the Launch of SIC5 Instant Payments Will Mean for Switzerland

by May 10, 2023

Globally, 63% of banks & financial institutions picked instant payments as their top priority over the next 12 months. Meanwhile, some of the biggest developments in Switzerland will concern the Swiss Instant Clearing (SIC) network. 

During the latest webinar hosted by Fintech News Switzerland, payment professionals gathered to discuss the developing banking trends taking root in Switzerland and internationally this year, and why they will make a difference for the digital payments strategy in both the short- and long-term. 

Fintech and banking expert Urs Bolt, who acted as the moderator of the session, pointed out that the largest Swiss banks will be able to receive instant payments on the SIC network in 2024.

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He discussed instant payments alongside other general trends in Switzerland, but also in neighbouring countries with panelists Daniel Capraro, the Co-founder and Chief Product Officer of Swiss digital challenger bank Yapeal, and Bruno Kuderman, Senior Product Manager for Products & Solutions, Banking Services at SIX, the Swiss financial market infrastructure operator. 

For the second half of the webinar, they were joined by Frederic Viard, the Director of Global Marketing and Financial Messaging, Bottomline Technologies

Instant payments doesn’t mean instant – near time is not real-time

Daniel said that at challenger bank Yapeal, they still see end-to-end timing of 10 seconds for “instant” payments, which fulfils most requirements. But in the broader payment context, such as for real-time checkout payments, it is still too slow and said the situation is the same in the UK. 

“We just learned from Daniel that ‘instant’ obviously doesn’t mean instant in its real sense,”

said Urs.

Urs Bolt, moderator

Urs Bolt, moderator

“So it’s more like, maybe, near time and not real-time. I think the trend is clear speed. ‘Instant’ does not mean 100% instant as we see it. And that’s the reason why we have the intention to bring instant end-to-end, risk-free, in central bank money in Switzerland live by the year-end, in production by next year for all the major banks.”

said Bruno.

SIC5 to power real-time payments in Switzerland

Urs said this is what the SIC5 mandate by the Swiss National Bank (SNB) intends, which is to set a 10-second time-limit on end-to-end payments processing. Bruno says the more accurate comparison is with the European Payments Council’s SEPA Instant Credit Transfer scheme, more commonly known as SCT Inst, which has become the benchmark for participating banks in Europe.

Responding to a Q&A question about Holland adopting SCT Inst as a “new normal” for payments in the country, Bruno commented that Holland has even customised its rules for customer payments with higher allowed amounts.

“So ‘new normal’ is a term which must be interpreted from community to community. That’s what we have learned during the SIC5  project.”

Bruno Kuderman, Senior Product Manager, Products & Solutions, Banking Services, SIX

Bruno Kuderman, Senior Product Manager, Products & Solutions, Banking Services, SIX

Daniel added that the SIC5 instant payments will be available 24/7, which is not the case today.

“And from that point of view, it’s really a great starting point. I think we need to figure out how fast traditional banks can adopt these payment methods as well.”

B2B payments use cases in Switzerland

From the B2B perspective, Daniel said being able to perform a direct settlement on every transaction would bring a lot of benefits for all participants.

“So it’s directly settled, if I’m a merchant, I can directly use the money [immediately].”

He added that the goal was for the sender bank and the receiver bank at the last mile to have well digitised operations, “they are then able to process those payments requests and payment receipts instantaneously, then you have this great customer experience.”

Diving deeper into use cases for real-time payments in Switzerland, Daniel gave the example of online casinos which usually only pay out to a Swiss IBAN where the funds could take up to days to arrive in the account. 

Daniel Capraro, Co-Founder and Chief Product Officer, Yapeal AG

Daniel Capraro, Co-founder and Chief Product Officer, Yapeal

“And that’s exactly a case where we enabled the casinos to have a counter to appeal, do an instant payment, and the recipient gets it instantaneously,”

Daniel went on.

Bruno agreed with him and elaborated,

“And from that moment on, he can spend the money with the card, with any other payment rails, but he has the money received in his account. The SIC system is the Swiss interbank system and settles mass payments and high value payments within one system that is a specific feature within Switzerland, which does not exist in other countries.

So it is risk-free money transferred interoperably, so that any participants, and we talk about a potential of 300 participants, which covers all banks in Switzerland will be able to do such services – intrabank and interbank – so that’s the key, it’s not only a closed loop.”

Bottomline’s role to power real-time payments

With companies like SIX supplying the payments infrastructure, there are still issues for banks in Switzerland and elsewhere to overcome legacy systems as they transition towards Software-as-a-Service (SaaS) models.

Frederic said the first thing Bottomline will provide to the marketplace is connectivity to these new banking environments, “to be able to manage the lifecycle, the messages that must be exchanged to ensure that this instant payment processing is made accordingly.”

The end-to-end message processing then has to be managed, along with ensuring that the service is available on a 24/seven basis. Frederic highlighted that for banks to find these round-the-clock payments processing as reliable, many of what he terms “last mile components” would have to be tested to meet the new capacity requirements.

Frederic Viard, Director of Global Marketing and Financial Messaging, Bottomline Technologies

Frederic Viard, Director of Global Marketing and Financial Messaging, Bottomline Technologies

Frederic responded that the maturity of the market also played a part as there are no fragmentations in the Swiss payments market. Nonetheless, Switzerland could do with a “upgrade” to cope with instantaneous 24/seven availability, as future needs move towards an immediacy in customer experience expectations.

“So again, it’s not about really changing something which is required right now. But it’s predicting the future, enabling Switzerland as being the endpoint for instant payments cross-border, and building a new generation of services that will be required or that are already required by the new generation.”

The full webinar can be accessed via this link, if you enjoyed this content please consider subscribing to our YouTube channel Fintech Fireside Asia.