The introduction of the instant payment system from the perspective of CIB Bank Zrt

Dr Pál Simák

Chairman & CEO, CIB Bank Zrt.

The first thing that comes to my mind in connection with the introduction of the instant payment system is that this was a large-scale and successful project in the history of the Hungarian banking sector, which is particularly special to me for three reasons: • This was the first time when it was demonstrated that outstanding results that can be achieved through collaboration among the members of the sector, the MNB and

GIRO. The regular consultations and information exchange helped a great deal in enabling the players in the sector to successfully complete this gargantuan task. This cooperation model was used to successfully join forces against the challenges posed by the coronavirus, and it has been proven several times since then that this type of collaboration is very good practice even when it comes to day-to-day operations. • From a professional perspective the task was a truly exciting challenge. There are several developments in the banking sector that seek to enhance customers’ everyday banking experience and the quality of the services; yet my colleagues were particularly keen to participate in this project among many others because instant payments are the basis for numerous future bank services, they play an instrumental role in fending off the challenges posed by fintech firms. • What made participation in this project particularly valuable for CIB is that one of the pillars of CIB’s strategy is digitalisation. The introduction of the instant payment system gave an additional impetus to that.

The consultations with the MNB on the rollout of the instant payment system started in the summer of 2017. CIB became an active participant of the consultations relatively early on partly because our parent company, the Intesa Sanpaolo Group, was already offering this service in Italy. Several aspects of the implementation that the MNB insisted all throughout the project seemed far from being straightforward or simple: • execution of transfers in five seconds for domestic transactions in all electronic channels, even as the international norm had been ten seconds; • ensuring 24/7 operation; • obligatory participation for all the members in the sector; • introduction on 1 July 2019, which left roughly two years for the development following the inception of the idea; an unprecedented challenge in international practice.

For CIB, the project started in late 2017, which was perhaps one of the factors why we were able to spearhead the development process. The largest project in recent years was set up back then: there were 6–7 workstreams, with the almost continuous participation of around 100 people, many of whom were specifically dedicated to this project. The costs were also worthy of a ‘mega’ endeavour. My colleagues were competing to participate in it, because they regarded it as a prestige challenge. A very good team was established representing almost all areas of the bank, because the introduction of the system affected practically all of our systems and business operations. In the words of one of our project leaders, ‘we were a truly passionate and dedicated team’. The project, simply referred to as ‘AZUR’ inhouse, offered colleagues an insight into how a nationwide project can and should be run.

Although the rules set by the MNB and their consistent pursuance proved a trial of strength, in hindsight they definitely proved to be very useful: the central bank carefully assessed international experiences and picked a good system. Initially, there were many open questions as to the application of the decree, but these were clarified during the regular consultations within the Hungarian Banking Association. It proved to be a wise decision to make participation in the system obligatory: this is what truly ensured that the system worked for all electronically initiated transactions of under HUF 10 million across the country between any two banks. And it was also sensible to postpone the introduction by eight months, ensuring that all banking players would be safely prepared for the launch. We at CIB were ready with the necessary developments by the original deadline and to us this provided an opportunity to continue carefully testing the system. We were very pleased and proud to have been able to help others.

In-house, we first had to assess which road to take: to build on our existing features or choose a new solution. In the end, taking into account the resource requirements, we

decided to do the former, which proved to be a fortunate choice. At that time, intrabank transactions were already executed immediately in CIB and the related accounting technology and permanent availability parameters also necessary for the instant payment system were in place as well. Of course, there was still the occasional bump in the road, but having continuously consulted with our parent company and used its experiences and built on the extraordinary efforts of our suppliers and mainly my colleagues, CIB was ready to safely launch the system on the original go-live date. During the whole project one thing was sure and also our primary objective: to ensure the stability of core banking operations. This was the largest challenge and risk during our work. To offer another sneak peek into our processes, our system was built in a modular manner, the different functions went live one by one, and they could be switch on and off during testing. In the end, on 2 March at 0:00 a.m. a single button had to be pressed.

The launch was naturally surrounded by great excitement. All the participants of the project were present in our IT centre, their eyes on the projected clock around midnight, waiting to see what happened in the ensuing minutes and hours. It may sound conceited, but we were not concerned for ourselves in particular, but because we knew that this had been a truly great challenge requiring truly huge resources and even if the project participants supported each other all along, especially in the last extra six months, not everyone had a smooth ride. We now know that my colleagues had every right to celebrate: the launch was successful, and the instant payment system has been operating without any glitches since then.

Our accomplishments exceeded all our expectations: today 97 per cent of transactions are executed in two seconds. The experiences show that customers’ habits have clearly been transformed since the rollout of the system. In the first three months, despite the fact that due to the pandemic work schedules had been modified considerably across the whole country and many people were working from home, 31 per cent of the transactions were initiated outside normal working hours. We gathered plenty of experience regarding immediate payment requests. For example in the case of emergency repairs or in consideration of online private lessons, some service providers ask clients to transfer the amount ‘on the spot’ once the work has been completed, so that they can see the amount showing up on their balance in seconds. At CIB, our customers can do this free of charge in compliance with the MNB’s proclaimed concept and supported by the price setting method for the service provided through GIRO, namely that banks should use package pricing for retail customers and the individual transfers should not entail extra costs. The instant payment system can truly help realise the MNB’s other intention announced at the

beginning of the project, namely that the economy should become increasingly cashless, transparent and digitalised.

The system, as established, is set to give impetus to further digitalisation in the future. One of the most straightforward options is the introduction of the request-to-pay or the mobile payment service. We may foresee with confidence that instant payment in the banking system will be regarded as naturally in the future as having electricity, heating or water in our homes. We will not able imagine living our everyday lives without it or how this could have been any different in the past.