Exploring SIC Instant Payments in Switzerland: Challenges, Solutions, and Future Prospects

Exploring SIC Instant Payments in Switzerland: Challenges, Solutions, and Future Prospects

by March 1, 2024

Instant payments are the most positive development for the Swiss financial sector in years due to their proven role as a catalyst for change within that system.

Whilst instant payments are mainly used for domestic purposes (96%) rather than cross-border, they hold the promise of providing Switzerland with a competitive and innovative marketplace where citizens and SMEs can leverage the speed for improved liquidity and enriched data for transparency.

Implementing SIC IP is not only about coping with a processing time of 10 seconds; it also has ramifications across the whole ecosystem, with many areas such as end-user experience, non-stop availability, sanctions screening, balance check, reporting, storage, and flow orchestration being impacted. Therefore, this whole integration needs to be carefully planned and implemented.

As of the 17th of November 2023, the four pilot banks have been successfully processing and handling productive instant payments with an average latency of 3.5 seconds and with zero rejections.

A further 62 SIC participants will join by August 2024 as part of Phase 1, the official launch date. Phase 2 of the SIC5 project is currently underway with two key elements: connecting a further 260 SIC participants to the SIC IP service and migrating the SIC and euro SIC RTGS services from the SIC4 platform to the SIC5 platform.

As Phase 2 FIs kick-start their project roadmaps to meet the SIC IP Group 2 deadline in 2026, it is vital that they unpack the most efficient strategy for SIC IP implementation.

This article summarises the key challenges, solutions, and potential benefits of SIC Instant Payments that emerged from business payments company Bottomline’s recent webinar SIC Instant Payments: A Catalyst for Competitive Advantage.

Here are a few actionable insights and an overview of the current state and future trajectory of instant payments in Switzerland.

Key Considerations for Implementing SIC Instant Payments

Bruno Kudermann, the Senior Project Manager at SIX for the Swiss payment systems SIC and euroSic and who is leading the business stream with the project for SIC5, had the following key advice.

  • Register early for the testing window to avoid delays as it is first come, first served.
  • Look at the full end-to-end process from booking systems to the treasury when preparing for SIC Instant Payments.
  • Talk to system providers right away about SIC Instant Payment readiness.
  • Focus first on getting domestic instant payments, then consider cross-border as a secondary priority.
  • Consider using external providers/platforms to help update your organisation’s core systems.
  • Address operational aspects like 24/7 operations, reporting, and customer service for instant payments.
  • Develop customer offerings leveraging instant payments.
Dennis Flad

Dennis Flad

This was a view supported by Dennis Flad, partner at t’Charta AG, a leading Swiss-based consulting boutique. He said,

“From registering early for testing windows with SIX to optimising sanction screening filters, the action items outlined by Bruno above offer a strategic roadmap for navigating the intricacies of instant payment implementation.

Moreover, the emphasis on prioritising domestic instant payments before venturing into cross-border transactions underscores a pragmatic approach toward ensuring operational efficiency and regulatory compliance.”

Bruno Kudermann

Bruno Kudermann

Bruno also had a message for those private banks and asset managers that aren’t already included in the mandate and considering opting out:

“Opting out of SIC IP means you can’t make any customer payments within the entire SIC system, including RTGS.

Therefore, it is a very dangerous choice to make, and so please consider this very, very carefully.”

Overcoming Infrastructure and Resource Hurdles

One of the central themes that emerged from the discussion was the prevalence of challenges hindering the seamless adoption of instant payments – 48% of the webinar attendees said that lack of IT resources and prioritisation within an already busy road map was the most significant barrier to adoption for SIC IP.

This was followed by legacy infrastructure at 30% and the cost and hassle of implementing a new rail at 22%.

Frédéric Viard, Head of Commercial Product Propositions for Financial Messaging at Bottomline, echoed these sentiments, emphasising the necessity of 24/7 availability and scalability in overcoming infrastructure limitations.

He also suggests a key solution to these pain points: leveraging trusted and experienced third-party providers for support, rather than attempting to manage everything internally.

Frédéric Viard

Frédéric Viard

Frédéric also addressed the issue of security within transactions such as fraud protection, sanctions screening, and IBAN pre-validation.

“You don’t have the time in a 3.5-second end-to-end transaction for exception handling, so you can’t rely on in-flow screening to reduce your false-positive rate. The solution is to optimise your filters in advance by doing offline batch screening and cleaning your customer database to address known screening issues.

I also recommend following the lead of the European Commission, which has made IBAN checks and daily KYC part of the criteria for the SEPA Inst Mandate that was ratified on the 7th of February 2024.”

Despite the challenges, the conversation illuminated the myriad opportunities and benefits of embracing instant payments for banks and financial institutions.

Speakers highlighted the potential for enhanced customer offerings, improved working capital management, and reduced transaction costs by adopting real-time payment solutions.

Moreover, the interoperability of instant payment systems, both domestically and across borders, emerged as a cornerstone for fostering collaboration and innovation within the industry.

Role of Tech in Fueling Real-Time Payments

Central to the discourse was the pivotal role of technology and innovation in driving the evolution of instant payments.

From leveraging ISO 20022 structured data for operational efficiency to streamlining internal systems for bank payments, the dialogue underscored the transformative potential of technological advancements in reshaping traditional banking paradigms.

Furthermore, exploring emerging use cases, such as QR code-based bill payments as opposed to traditional invoicing to provide instant remuneration and avoid trapped liquidity and real-time balance visibility for corporate clients, highlights the dynamic nature of instant payment ecosystems.

Accelerating Timeline for Adoption

Starting the SIC IP project immediately is crucial due to limited time and longer than expected implementation timelines.

Additionally, treat the implementation as more than an IT project as it covers all silos within the bank, from operations through to customer-facing support.

Ultimately, SIC IP empowers financial institutions to deliver added value to customers, reducing churn and fostering loyalty. It is also about optics; all banks want to be seen as innovators by their customers, not laggards, and access to real-time payment rails is the top priority for corporations, followed by cash visibility.

By fostering collaboration, embracing innovation, and prioritising customer-centric solutions through SIC IP, banks and financial institutions in Switzerland can maintain their premier status on the world stage and chart a course toward a more inclusive, efficient, and resilient payment ecosystem in the digital age.

Watch Bottomline’s on-demand SIC Instant Payments: A Catalyst for Competitive Advantage webinar here

SIC Instant Payments

Featured image credit: Edited from Freepik