QUestions and ANSWERS

Instant payments demand immediate screening overhaul. Banks and PSPs must take action.

Banks and payment service providers in the EU, Switzerland, and Liechtenstein are now preparing for Instant Payments. What must they keep in mind during this process? How can they optimise their sanctions list screening for speed? Where do uncertainties still exist?

ADWEKO and ACTICO shed light on various aspects of the new Instant Payment regulation. In doing so, they address the questions that remain unresolved for banks and payment service providers.

ADWEKO ACTICO Instant Payments
QUESTION ADWEKO:

Hello ACTICO,
due to a new regulation, the EU, Switzerland and Liechtenstein are strategically focussing on instant payments. Instant payments will become the new mandatory standard in payment transactions. As published by the European Union on 19 March 2024, the regulation stipulates that payment service providers will in future be obliged to offer their customers individual payments in real time, 365 days a year, around the clock. This brings with it certain challenges. As we are long-standing partners, we know that you have already gained experience in instant payment. Can you please give us an insight into the current situation for financial service providers?

ANSWER ACTICO:

Hello Adweko,
I am happy to answer your question. As a software provider, we have been working with banks and financial service providers for a long time. Due to the short time window until the beginning of 2025, preparations at financial organisations are in full swing. Instant payments fit well into the digitalisation strategy. The crux of the matter is that the risks are higher, IT systems have to make decisions in fractions of a second and 24/7/365 must be secured both in terms of personnel and organisation. The goal is a high level of customer satisfaction in payment processing combined with a high level of security.

QUESTION ADWEKO:

The timeline for the regulation is tight. What do the banks need to pay particular attention to in the context of the introduction of instant payment and the deadlines?

ANSWER ACTICO:

The timeline for implementing instant payments, along with the associated processes and systems, is indeed very ambitious. While some institutions were hoping for a screening ban, other banks took early measures and are therefore well prepared. The banking examination, such as preventing criminal activities like fraud, must be conducted before the payment is executed.

QUESTION ADWEKO:

Can you outline for us from your perspective how instant payments differ from current SEPA credit transfers?

ANSWER ACTICO:

The main difference lies in the time available to execute the payment. For instant payments, this is immediate, or the bank has a maximum of 10 seconds to complete all processes and checks. In contrast, SEPA transfers can take up to a day to be executed.

This difference significantly increases the risk with instant payments. Therefore, strict and reliable search algorithms are a core issue.

For transaction screening, this means that manual clarification is not possible. As soon as a “hit” is found, the payment is automatically rejected. To maintain customer satisfaction, reducing so-called “false positives” in instant payment screening is even more important than with SEPA transfers.

QUESTION ADWEKO:

Since instant payments are generally processed within 10 seconds, the corresponding verification mechanism must be very fast. How much time does the ACTICO Instant Payment Screening solution need to check payments?

ANSWER ACTICO:

Our Instant Payment Screening solution allows for the approval or stoppage of a payment booking within 500 milliseconds to a maximum of 1 second. The core functionality is the parallel screening from various perspectives (sanctions screening, anti-money laundering, and fraud prevention).

QUESTION ADWEKO:

Since ADWEKO and our customers operate worldwide, we would be interested to know which country-specific regulations are addressed with ACTICO Instant Payment Screening?

ANSWER ACTICO:

In the EU, for example, Regulations 2580/2001, 881/2002, 83/2011, and other implementing regulations apply. In Switzerland, the Embargo Act and corresponding ordinances apply. Worldwide, other regulations and the recommendations of the FATF are in effect. All these regulations are duly considered in our instant payment screening solution.

QUESTION ADWEKO:

Can you tell us a bit more about the scope of your ACTICO instant payment screening solution?

ANSWER ACTICO:

Thank you very much for your question I’m happy to explain how banks can utilise in

  • Screening of instant payment transactions against sanctions, embargo, and stop lists
  • Automatic approval or rejection of instant payment transactions
  • Benefit from tools for systematic reduction of false positives
  • Documentation of all checks and anomalies
  • High performance with completion of checks in under 1 second
QUESTION ADWEKO:

How does the verification mechanism outlined above work in detail?

ANSWER ACTICO:

The Instant Payment Screening solution checks payments against screening list entries. The application has adapters for public lists such as the EU or OFAC lists, as well as lists from Dow Jones and LSEG (formerly Refinitiv).

Additionally, payment data can be screened against custom lists. The software also verifies details about the recipient or sender, payment data, and booking texts. By utilizing machine learning, fuzzy matches in payment monitoring can be identified in a cost- and risk-optimized manner.

QUESTION ADWEKO:

We keep hearing our customers’ fears that an automated real-time check will lead to increased payment cancellations due to supposed “hits” in the comparison with the sanctions lists. In this context, how can the customer experience be improved with the ACTICO instant payment screening software?

ANSWER ACTICO:

The main goal of ACTICO’s instant payment screening solution is to minimize the number of payment interruptions related to potential hits (so-called “true or false positives”) during the ex-ante screening. To reduce the false positives, we utilize methods such as machine learning and white-/blacklisting.

Lars Patrick Buchholz has over 13 years of experience in banking. He has worked in various roles at credit institutions and in a management consultancy. He has extensive knowledge of payment transactions at banks, which is also reflected in his consulting mandate through his strong focus on payment transactions.

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Lars Buchholz von ADWEKO mit ACTICO
Franzika Mohr von ACTICO mit ADWEKO

Franziska Mohr has been an expert in compliance solutions at ACTICO for around 10 years and supports banks and insurers in the preparation and implementation of projects. This includes instant payment in particular.

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