INFRASTRUCTURE: REAL-TIME RAILS Fast mover: Banks and PSPs were compelled to adopt real-time payments
Hungary for change
OTP Bank’s Gabor Bujaki and Dean Wallace from ACI Worldwide explore the possibilities presented by the AFR – a domestic real-time payments scheme that has supercharged banks’ digital transformation
The race to real time is hotting up in markets across the world, and Hungary is a particularly interesting case study. The country is unusual in that, since last Spring, it has mandated that domestic credit transfer services must be real-time (settled within five seconds, in fact) for all individual and bulk retail transactions and individual corporate transactions. The system, involving the clearing house, GIRO Zrt, and 35 payment service providers (PSPs), working in tandem with the country’s banks, is known as AFR. This is part of Hungary’s longer-term ambition to clean up the shadow economy – said to be worth 11.18 per cent of Hungary’s GDP – by moving away from the cash that has accounted for 80 per cent of retail payments. Based on Europe’s SEPA Instant Credit Transfer Scheme (SEPA Inst), AFR is the brainchild of the Central Bank of Hungary (MNB) and, according to the scheme’s detailed rules, a transfer must now be made available to the beneficiary within five seconds; the amount credited must be irrevocable and immediately at the disposal of the account owner; and, if the transaction is rejected, a message must be automatically generated to the payer. The AFR promises a host of benefits for both merchants and their customers. www.fintechf.com
For example, it will likely fuel the adoption of QR codes at cash desks, with the five-second execution time very efficient when it comes to queues. It also allows consumers to make one-off transactions, including significant purchases such as buying a car, which, like the rest of us, most Hungarians make at the weekend, outside of a PSP’s normal working hours. Another forward-looking feature is that secondary identifiers can be connected to the accounts – including email address, mobile number, business tax number and consumer tax ID number – besides the traditional IBAN (international bank account number). The scheme also supports request to pay (RTP). In the first year of operation, more than 114 million transactions were executed through AFR, with a total value of HUF 17,400billion. Ninety-six per cent of them were processed within two seconds. The stability of the system is no mean feat, considering the changes banks were required to make in fairly short order to align with it. As András Linczmayer, of project management consultants Mindspire, which helped several through the transition, wrote in a recent blog: “The biggest challenge of the implementations was that most of the legacy financial back-end systems are not designed for
99.9 per cent availability; banks had to make large-scale developments and introduce new shadow systems to be able to fully comply with the regulations within the given deadline.” Hungarian OTP Bank Group, one of the largest independent financial service providers in Central and Eastern Europe, which was named Hungary’s best digital bank this year, was well ahead of that curve. It’s enjoying the opportunities opened up by the AFR, and is working on the technology to support its long-term success and possible expansion. “We’re innovating heavily in terms of payment methods,” says Gabor Bujaki, a senior consultant at OTP Bank who focusses on merchant acquisition. “Our team is collaborating with universities and those creating future technologies in order to find out which fits Hungary’s real-time banking strategy the best. “Our aim is to meet all the electronic payments solutions that merchants are interested in – if they want to have QR code scanning solutions, for example. Ultimately, electronic and contactless payments need to see significant IT development. I think that cooperation between banks, acquirers, and other ecosystem players will be pivotal to restructuring the future payments landscape.” Issue 9 | ThePaytechMagazine
13