SCT Inst for Cards
The Berlin Group analysed how SCT Inst may support reconciliation and settlement of card transactions through a White Paper approach.
Background
The European banking industry has implemented the SCT Inst scheme to support pan-European instant payments. Within this scheme, funds are made available to the creditor within seconds. The financial risks for these transactions in the interbank sphere are managed by the settlement system between the related debtor and creditor banks.
In a White Paper approach, Berlin Group had analysed how to use SCT Inst for the reconciliation and settlement of card transactions by extending the processes and formats used for SCT Inst to the requirements of settling single card transactions directly through the infrastructure by changing today’s pull mechanism between the acquirers of card transactions and the issuers of cards. The White Paper aimed to advance thinking within the Berlin Group on meeting European regulators’ vision of SCT Inst as the new normal for mass payments, in a transparent way, for the European payments industry.
The White Paper analysis described the use of SCT Inst for the reconciliation and settlement of card transactions within different technical scenarios. This document then offered banks and processors technical models detailed enough to support studies of potential implementation efforts and synergies with related standardisation and implementation projects. The White Paper was not delivering a technical standard or a detailed implementation feasibility analysis on its own.
The first version of the White Paper from 2021 was reviewed in 2023, taking into account the advanced specification of premium Berlin Group openFinance payment APIs and the arrival of the ECB digital euro project. The paper shows how openFinance APIs interconnect card and SCT inst rails seamlessly, by already offering all major card-related payment functions and by indicating how to support customer authentication methods provided by cards. At the same time, the ECB is also planning to support cards as a form factor for the digital euro. Assuming that digital euro processing will result in an instant payment system similar to SCT inst, the API-based architecture proposed in the White Paper would also perfectly align with the planned ECB architecture. Thus, architectures with premium payment APIs are expected to become a reality for cards as a form factor as well. For this reason, the Berlin Group added a new section on harmonised payment API platforms to the White Paper to raise awareness of the importance of scheme-neutral standardisation of such premium payment API functions, which will apply in the future to Open Finance, CBDCs, and cards.
The resulting version 1.1 can be downloaded here.