EBICS payment receipt in real time – utopia or reality!?

Payments with FTAM or EBICS have been characterised by contradictions for over 25 years. Eve-ry form of communication was a one-way street, there was always only a technical acknowledge-ment and you could only be sure that everything had really worked when you had manually down-loaded and read through the customer log with a time delay. A comparison for the process could be a postal letter sent in a non-transparent envelope with the receipt of the answer by postal letter in any envelope. Even though the transmission was of course much faster than the classic postal letter.

Well, time marches on, the need for an answer within seconds and, above all, a qualitatively meaningful answer is taken for granted today. EBICS must also slowly (finally!) meet this demand and offer new mechanisms.

However, the previous procedure of reciprocal transmission of the order and its response must not simply be ignored or even discarded. Existing process sequences in EBICS have their proven right to exist, especially when it comes to transmitting very large amounts of data, which even today require several minutes for complete processing. It is precisely this capability that is still the out-standing feature of EBICS.

In spite of everything, it must also be possible in the future in the EBICS protocol to be able to send smaller amounts of data faster and above all with an immediate business response.

To be able to consider these future requirements, the EBICS protocol was extended to include the EBICS real-time messages. In this, a second bidirectional communication channel is set up between the customer product and the EBICS bank server. In the current specification this chan-nel is initially only used for ad-hoc messages from the bank server to the customer product.

In the future, this now existing communication channel can also be used for submissions and in-stant business processing in the banking environment. This instant processing can then also gen-erate the necessary return messages and immediately – similar to the online banking – display a qualitative return message to the user.

Currently, this submission format is still being piloted with special EBICS systems and is not gener-ally established in the market.

However, much more important than the above future scenario is the generally available form of asynchronous return messages to customer systems and their users, i.e. the corporate customers, which has already been specified for two years. This EBICS real-time notification is documented in the specification "Real-time notification" and can be implemented by all manufacturers. It offers unique opportunities to inform customers, i.e. corporate customers, quickly and promptly about all kinds of changes to their various accounts.

With this new capability of the EBICS protocol it will be possible in future to send a real-time mes-sage via EBICS to the customer and the customer system already at the time of booking. The EBICS infrastructure will then provide an interface for this which can be integrated into corre-sponding booking systems or it will also be possible to use any other text-based messages from other banking systems and thus always provide corporate customers with new messages. De-pending on the performance of the customer systems, many new interesting forms of application can be realised.

For financial institutions which do not want such a close coupling between EBICS and their busi-ness applications or for which integration is too cost-intensive, another option will arouse interest.
EBICS bank servers – such as TRAVIC-Corporate – can send an immediate message to the cus-tomer system(s) assigned to the customer each time data is provided, signalling that new data, e.g. an incoming account notification, is available.

This form of notification will generate interest i.a. among customers, especially in the context of instant payments. In the future more and more – regulated – payments will be based on instant payments and thus be executed quickly. This means that the payment receipt by the corporate customer must also be indicated immediately so that the goods or services can be delivered or provided quickly.

EBICS real-time notifications are the most important element of an instant payments solution over the entire process.

These messages are also structured in such a way that customer systems – such as TRAVIC-Port – can derive actions from them internally. Automated downloads of the data provided by the fi-nancial institution become possible.

And if EBICS real-time notifications become more and more established in the market, the many "hopeful queries" from customers – 80 to 90 % of account statement queries from customers are answered with "no data" – will no longer take place. Customers will rely on this new mechanism. For the operators of EBICS bank servers this means that they only incur consumption costs when data is actually available. This is an important savings effect for financial institutions, which means that their server systems are allowed to be smaller and are actually much less frequented.

However, the whole scenario can only gain momentum if financial institutions start to offer this service; waiting for the customer product manufacturers will not work, as they always only incorpo-rate changes into their products if there are actually suppliers – i.e. EBICS bank servers.

My appeal to the EBICS banks: Start the new service to use the next generation of the EBICS protocol for yourself and, above all, for the benefit of your customers.

Author: Michael Schunk

Stablecoins blog post series – part 3: regulatory requirements

As already teased in our second blog post in the series on the topic of stablecoins, this final article will take a closer look at the regulatory aspects of stablecoins.

Fittingly, the European Union published the comprehensive MiCA regulation in the European Official Journal on 09 June 2023. It forms the European regulatory framework for crypto-based currencies and thus sets global standards for the regulation of crypto assets. While the desire for uniform regulation of cryptocurrencies in the US is growing, Europe is taking an unusual position as a driver of innovation, even though the regulation will not fully apply until 30 December 2024. It remains to be seen whether this set of rules will only be applied exclusively to the European market in the future or whether the US market, for example, will simply follow or adopt a similar set of rules.

What does the MiCA regulation bring?
First of all, the regulation is a clear signal to the market that the handling of crypto assets in the EU is not to be prohibited or prevented. Instead, a sensible legal framework will be established in which the individual market players can move more securely from now on.

The new regulations provide for new challenges exclusively for the providers of crypto services and the issuers of crypto securities. End customers will feel much less change in their daily actions. However, they clearly benefit from their strengthened rights and increased market transparency.

MiCA licences
Service providers who wish to offer various services in Europe in connection with crypto assets will need a MiCA licence in future. Depending on the service, separate requirements apply to the service provider. The services subject to authorisation under the MiCA regulation are:

  • Operation of a trading platform
  • Exchange of crypto assets for nominal currency or other crypto assets
  • Execution of orders for crypto assets for third parties
  • Consulting for crypto assets
  • Custody and management of crypto assets for third parties
  • Acceptance and transmission of orders for third parties
  • Placement of crypto assets

Many companies see crypto currencies as a particularly lucrative business. The granting of a corresponding licence by the supervisory authorities offers companies another possibility to participate in the financial market in addition to the ZAG licence and the banking licence.

Increased requirements for issuers
In addition, the MiCA regulation also imposes requirements on issuers of "other crypto assets" and "stablecoins".
Stablecoins are divided into e-money tokens and value-referenced tokens. The value stability of e-money tokens is always based on exactly one official currency. The value of a value-referenced token can in turn arise from the combination of different goods, rights or crypto assets.
Since stablecoins are the focus of our blog series, we will refer almost exclusively to stablecoins in the following.

Crypto whitepaper for all
All crypto assets that exceed a certain threshold in trading volume, for example, must publish a crypto whitepaper before they are issued for the first time. This is similar to a securities information sheet in a somewhat watered-down form. There, potential buyers will find information about the issuer as well as information about the underlying technology and the business purpose of the token. Companies are liable for damages for the information they publish in crypto whitepapers or marketing communications. The days of exorbitant promises of returns for questionable new coins should thus have come to an end.

Reserve assets and equity
To guarantee a stable coin, the issuer must hold the value of the token as reserve assets at a ratio of 1:1. This guarantees the token holders' right of withdrawal or claim at all times. Furthermore, the composition of these assets must be openly disclosed and must withstand liquidity requirements, whereby a portion of the assets may be invested in low-risk transactions. Equity is either 350,000 euros, 2 % of the average reserve assets or one quarter of the previous year's fixed overhead costs, whichever is the largest. The equity can be upgraded or downgraded by 20-40 % depending on the risk potential of the token or the industry.

Separation of assets
The MiCA regulation stands for a clear separation between assets of clients and those of a service provider or issuer. Whether it concerns the retention of client funds, client crypto assets or other client holdings, everything must be strictly separated from each other. The reserve assets of a stablecoin must also be strictly separated from the issuer's corporate assets and held per token issued. Thus, even in the event of a possible insolvency of the custodian, it should be guaranteed that the customers retain the claim to their assets.

Case study FTX
Examples such as the crash of FTX showed in the past the impact it can have on the whole market when issuers of large tokens misappropriate their customers' deposits. FTX had lent customers' deposits as collateral for speculative crypto trades to the related company called "Alameda". Again, as collateral for these lent deposits, they accepted the company's own FTT token. When this token lost its value and the house of cards collapsed, the investors' deposits could no longer be bought back, as a result of which they are still waiting for their invested assets today.

Significant stablecoins
So-called significant stablecoins also have a major impact on financial stability in the EU. According to the regulation, a coin is considered significant as soon as it meets three of the following criteria:

  • 10 million customers (natural persons or legal entities)
  • 5 billion market capitalisation (total value)
  • 1 billion reserve assets
  • 2.5 million trades per day or €500 million per day
  • Special interconnectedness with the financial system
  • Issuer is a gatekeeper according to regulation (EU) 2022/1925.
  • Issuer issues at least one additional stablecoin and provides at least one crypto service.

These are automatically subject to supervision by the EBA and are subject to further duties and requirements. This includes i.a. further requirements for the reserve assets and their liquidity, which are regularly tested with the help of liquidity stress tests.

Finally, it remains to be seen how the MiCA regulation will affect the trading of stablecoins. ESMA, with the support of the EBA, will publish further specifications on the technical implementation of the regulations in the next ten months – which means that there are still many developments to come.

Authors: Benjamin Schreck, Jan Gäth