B2B Payments

Real Time Payments Demand Extends to Finland

With the emergence of new ways of doing business, including e-commerce and m-banking, real time payment systems are becoming a global sensation. Their use to handle everyday transactions was introduced in South Africa and Mexico in 2006, the UK in 2008, Poland in 2012, Sweden in 2013 and by Singapore in 2014.

Not only are they present – they are growing. Take UK Faster Payment system which now processes more than 1 billion transactions a year and accounts for almost 2x the number of checks written. A survey presented at the NACHA Payments Annual conference showed than 90 percent of professionals think such a system will be rolled out in US during the next five years.

Following this trend, the Federation of Finnish Financial Services launched a request for information (RFI) to update its payments system. In Finland, urgent payments are transferred between banks using the Finnish online urgent payment system (POPS) that handles payments twice a day on banking days only. POPS was launched in Finland in the early 1990s and is now becoming obsolete.

Its obsolescence has been made all the more apparent with rapidly approaching SEPA deadline. Banks in Finland found that the existing POPS system is not compliant with SEPA standards, which means the time for change is now as the Federation of Finnish Financial Services must find a real-time system that will replace POPS and meet SEPA.

The RFI details how the new payments system should handle real-time 24/7 transfers and also how it will provide solutions for complying with SEPA. Its deadline for presentations is September 12, 2014.

The statement affirmed: “Customer demands have changed and will keep on changing, and it is important for banks to have a payment system that makes it possible to develop real-time payment service products for both consumers and corporate customers.”

There were 343,000 urgent transfers in Finland in 2012, which represented only 0.16 percent of payment transactions, with a CAGR at 6.5 percent between 2002 and 2012. Despite the small percentage of transfers completed, the method is important because it allows firms to access a special service that permits transactions to be carried faster than regular payments. The average size of each transaction was EUR 959. Furthermore, the immediate payment system could be used for small value transactions.

SEPA credit transfers are available in Finland starting in 2010 and by 2012 they completely replaced non-SEPA credit transfers that included national banking identification format instead of European IBAN. This instrument was used in 42 percent of transactions in 2012.

The Finnish banking community invites all interested parties to submit a written response to the RFI, in English, by 12th September, 2014.

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