Jorgovanka Tabaković, Governor of the National Bank of Serbia

Region’s First Instant Payment System

The NBS’s IPS system enables the development of new, innovative payment solutions and services that will have an impact on the quality of the user experience

Half a year after the start of its implementation, Governor Jorgovanka Tabaković speaks in this exclusive CorD interview about the results to date of the introduction of the NBS’s IPS, the opportunities it brings to citizens and the economy, and the way that digitalisation is shaping the banking sector.

The instant payment system was introduced in Serbia last October – are you satisfied with its performance so far? How many payments have been realised in all?

As of 11th March, the total number of realised payments in the system was 1,688,627 and the average transaction time lasted 1.25 seconds. The average daily turnover value in March was around RSD 186 million. Of the total number of all messages, only 1.15% was denied, and this was mainly because the banks are still getting into a routine and their core systems are adjusting to ensure that participation in such a sophisticated system is stable and secure. I’d like to remind you that the NBS’s IPS is the first instant payment system in the region, and we are proud that it was launched one month before the Pan-European instant payment system (the ECB’s TIPS).

What has this system brought to citizens and corporates, and why is it important for the NBS?

The advantages of the instant payment system are an ability to make payments 24/7/365, including national holidays and weekends, the availability of money within seconds, and the option of initiating payments via different channels and all types of contemporary communication devices.

Citizens and corporates no longer need to worry whether a particular day is working or non-working, what time of day it is and whether their bank’s branch office is open. The NBS’s IPS system enables the development of new, innovative payment solutions and services that will have an impact on the quality of the user experience – among citizens and corporates alike.

By introducing the NBS’s IPS system, we have provided adequate infrastructure and an incentive to payment service providers, allowing them to enhance their business operations and services, and enabling payment service users to rely more on non-cash payment channels.

As of 11th March, the total number of realised payments in the system was 1,688,627 and the average transaction time lasted 1.25 seconds

When this option was launched, the NBS predicted that card payments would decrease by 30% over the next five years. What do these projections look like now? How has the card payment system been affected?

Relative to card payments, the advantage of instant payments at points-of-sale is that the money is deposited on the vendor’s account almost instantly, and not after a few days, as is the case with card payments. In this way, the vendor can manage liquidity more efficiently and plan business operations with more certainty. Also, instant payments allow the buyer to make purchases without having to carry a wallet or payment cards; all that’s required is to have your mobile phone with you, and you can easily scan the vendor’s QR code or present your own. As for the impact of instant payments on the number of card payments, only time will tell how this will unfold once the banks start applying for instant payments with large retail chains.

While in some segments we are progressive, it seems we remain rather conservative in others. Participants in this year’s Kopaonik Business Forum again underscored that we would not be able to develop platforms for fast international payments until the Law on Foreign Exchange Operations is amended. What progress can we expect in this area?

The most recent amendments to the Law on Foreign Exchange Operations provided for a significant degree of liberalisation of capital flows, i.e. international payment transactions, mainly towards EU countries, which was also positively assessed by the European Commission.

Thanks to the efforts of the NBS and the Ministry of Finance, amendments to FX regulations enable households and businesses to carry out international payment transactions not only through banks, but also through e-money issuers – in respect of electronic purchase/sale of goods and services, and through payment institutions and the public postal operator. This laid the groundwork for the further modernisation of international payments and the development of digital operations.

At the same time, I have to say that banks should also take further steps to upgrade their services, in order to enable citizens and corporates to submit international payment orders electronically, as well as documentation proving grounds of payment, i.e. facilitating determination of the payment code, all of which will ultimately contribute to faster and more efficient executing of international payment transactions.  

We adopted a decision on so-called video identification, which enables clients to be identified without them having to go to a bank’s branch while ensuring the full security of the identification process

How is the fourth industrial revolution affecting the transformation of the domestic banking sector? To what extent are Serbian banks active in terms of the digital transformation of their business and are we keeping step with Europe and the rest of the world?

In the spirit of the development of digital technologies, banks in Serbia should adjust to new trends imposed by modern business. This process started some time ago, and the NBS is creating preconditions and infrastructure for the digitalisation of market participants’ operations.

We recently adopted a decision on so-called video identification, which enables client identification without them having to go to a bank’s branch while ensuring the full security of the identification process. This means that the whole procedure of establishing a business relationship in the area of financial services can be shifted to the sphere of distance or online operations.

We expect banks to continue working on new software applications and systems, building on those already operational worldwide, and it is the role of the NBS, as a responsible regulatory and supervisory authority, to support them on this path. 

To what extent is it important for a bank to determine the level of digitalisation appropriate to its needs?

There is no doubt that, if they want to remain competitive, banks in Serbia, as in rest of the world, have to keep pace and rise to the challenges brought about by digitalisation by adjusting their operations to new trends in banking, new client profiles and new needs.

New technologies improve the efficiency of operations and reduce costs, but they should be applied adequately, bearing in mind a bank’s size, structure and business policy. While the digital transformation process does open up new possibilities, we should not lose sight of the potential risks involved, because safety and soundness are of critical importance to the banking sector.

Have the millennials brought tectonic changes to the banking system or is the whole story about the generation that allegedly “hates banks” exaggerated? Can a new generation eliminate bank counters in the near future?

Every new generation should be an incentive for banks to adjust their operations to the needs of that particular generation, while not forgetting the needs of other consumers of financial services either. Our banking sector features an increasing number of services offered through digital distribution channels, not only through traditional business models and at bank counters. Our duty is to insist on compliance with regulations in the field of financial consumer services protection, as well as on the transparency of prices and the terms under which banking services are offered, and to improve trust and enable consumers to select the services that best suit their needs. 

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