What is the EuroNKSInst payment system and who is its operator?

In accordance with the provisions of the Payment System Act, the Croatian National Bank granted authorisation to the NKSInst payment system on 12 February 2020 and it started operating on 29 October 2020. With the introduction of the euro as the official currency in the Republic of Croatia, as of 1 January 2023, this system continues to operate under the name EuroNKSInst.

A payment system is an infrastructure that enables the transfer of payments between accounts held with different payment service providers (interbank payments). This payment system also allows for the execution of payments between accounts held with the same payment service provider (intra-bank payments).

EuroNKSInst is a payment system for the execution of payment transactions in euro, between the payer and the payee, in almost real time.

Payment system participants may be credit institutions (banks). A clearing day of the EuroNCSInst payment system is equal to a calendar day.

The new EuroNCSInst payment system is operated by the Financial Agency (hereinafter: Fina).

Fina is also the operator of EuroNCS on the Croatian payment market (since 2016 for the execution of national and cross-border SEPA payment transactions in euro).

What is instant payment made through EuroNKSInst payment system?

SEPA instant credit transfer payment transactions in euro (instant payment) are executed through the EuroNCSInst payment system.

SEPA instant credit transfer is a payment transaction for which the rules are prescribed by the European Payments Council and is one of the payments of the Single Euro Payments Area (SEPA).

Instant credit transfer is a credit transfer carried out in a very short time (near real time) – instantaneously, 24 hours a day, 7 days a week and 365 days a year (24/7/365).

The instant credit transfer service in euro can be used by clients of banks participating in the EuroNCSInst payment system, through various payment channels (online or mobile and internet banking, via a mobile application).

What is a credit transfer?

Credit transfers are payment transactions initiated by payers by which the payer debits his or her IBAN account with a bank and credits the payee's IBAN account with the same or another bank, either via paper forms (over-the-counter at bank branches or at institutions/companies that have a contract with banks to receive payment orders) or via internet or mobile banking.

Although this type of payment transaction is often used by consumers as a synonym for a payment order, it represents a credit transfer. Such a payment transaction is not associated with the term "credit", but comes from the English term credit transfer, which implies that the payer has initiated a cash transfer to credit the payee's account, i.e. credit.

What are the potential applications of payments that can be initiated as instant credit transfers (instant payments)?

Instant credit transfers (instant payments) have the possibility of wide application.

They apply to peer-to-peer or person-to-person payments (P2P), peer-to-business payments (P2B) and business-to-peer payments (B2P) and business-to-business payments (B2B).

Examples of P2P payments are payments to friends, family members, bill sharing in catering facilities, sharing the cost of buying gifts between friends, borrowing, etc., and they are often characterized by urgency.

P2B payments can be, for example, buying in an online shop, paying for taxi services, paying bills in a restaurant, paying for utilities, paying for emergency insurance, paying for parking and tolls, using vending machines for food and drinks, top-up subscription bills.

B2P payments can be for example insurance payments, refunds (complaints) in shops, but salaries, daily allowances and travel allowances or professional fees can also be paid.

B2B payments can be payment of invoices, payment of emergency insurance, payment of customs duties, payment of taxes, contributions and other charges.

Which banks are participating in the EuroNCSInst payment system?

Currently participating in the EuroNKSInst payment system are:

• Addiko Bank d.d.
• BKS BANK AG, Main Branch Croatia
• Hrvatska poštanska banka d. d., Zagreb
• Istarska kreditna banka Umag d.d.
• Partner banka d.d., Zagreb
• Privredna banka Zagreb d.d., Zagreb.
• Zagrebačka banka d.d.

When will other banks join the system?

The Croatian National Bank expects that other banks will also provide conditions for the provision of instant payment services to their clients.

What are the basic features of this payment system compared to other payment systems in the RC?

The basic features of instant credit transfers executed through the EuroNCSInst payment system are:

• execution of payments in near real time
• payments are made 24 hours a day, 7 days a week and 365 days a year (24/7/365)
• accounting day is equal to calendar day
• the maximum amount of payment per individual payment transaction is set at up to EUR 100,000.00.

This payment system allows you to make instant payments in almost real time, i.e. within a standard time of no longer than 10 seconds. That time limit shall include the debiting of the payer's IBAN account, the execution of the interbank clearing of the default instant payment transaction and the crediting of the payee's IBAN account. In relation to the above standard execution time, and given the nature and purpose of the instant payment service, EuroNKSInst payment system will use its technological solutions to significantly shorten the required execution time, i.e. up to 4 seconds.

What are the advantages of this payment system for users of the payment services of banks participating in EuroNCSInst payment system?

Advantages of EuroNCSInst payment system for payers and payees:

for payers:

• execution of payment (settlement of obligation) at any time
• execution of payments from any location via digital channels
• execution of payments immediately within a very short period of time
• ease of payment execution
• the possibility of developing and using mobile applications for different payment purposes
• the possibility of cashless payment for those who do not have or do not want to use payment cards

for payees-consumers:

• immediate crediting of the payee's IBAN account
• the funds are immediately available in the payee's account and can be used
• the ability to develop and use payment applications on a mobile phone

for payees-traders and other service providers:

• immediate crediting of the payee's IBAN account
• establishing new forms of online sales or sales of goods and services that were not suitable or profitable for sale through other forms of payment;
• better liquidity management
• lower transaction costs (no costs of cash manipulation, cash protection, fees for card transactions, etc.)
• attracting new market segments and new customers – instant payments can be used in services that until now have been exclusively paid for in cash;
• instant payments can be used by recipients who do not want or cannot receive payment cards.

What does the payment system in the RC get by the beginning of operation of this payment system?

With the EuroNKSInst payment system, payment service users are provided with an instant payment service 24 hours a day, 7 days a week and 365 days a year (24/7/365), i.e. on non-working days too (e.g. Saturday/Sunday or during holidays). Instant payments are the basis for the development of new, innovative forms of payment based on speed and innovative digital solutions. The special feature of this payment system is reflected in the rapid exchange of funds from the payer to the payee.

How much do instant payments through the EuroNCSInst payment system cost for payment service users (consumers, business entities)?

Payment service providers (banks) set charges for their users for instant payments independently on a market basis.

How are instant payments made?

Users can make instant payments online, by online and mobile banking.

However, in order to initiate instant payments, the bank may also develop and offer service users special mobile phone payment applications, which are now widespread on the European Union market. Such applications allow you to quickly and easily set up and receive instant payments, easily search for executed payments and a number of other useful functionalities. Mobile applications can be part of existing mobile banking applications or they can be developed and used as stand-alone mobile applications.

Each bank can develop its own solution, and the Croatian banking community has also initiated the development of a standardised payment platform for all payment service providers on the Croatian market.

Example of using a payment application on a mobile phone:

• The payer contracts a service with his bank, and the bank allows him to use the service either through mobile banking or through an independent application.
• The application that is available on the internet must be installed on the mobile phone and activated with access passwords provided by the bank to the user.
• Using the application, the payer can make a payment to debit his or her account and credit the account of the payee (family member, friend, merchant or other service provider, etc.).
• The payee is selected by the user of the service from his contacts in his mobile phone, and the application connects the selected contact with his account IBAN using a database (for example, the Register of Indirect Account Identifiers – RPIR).
• The application can offer different payment options: distribution of bills in the restaurant, a request to share the cost of buying gifts among friends, etc.
• The application can also offer simplified payment of invoices for purchased goods or services by scanning the QR code from the invoice on paper, tablet, POS device and the like.
• From the QR code, a payment order with all the necessary data is generated.
• The payer authorizes the transaction in a stand-alone application or through his mobile banking in the same way as any other payment in mobile banking.
• The payee-consumer receives an instant notification when the payment is credited to his IBAN account and can use the funds immediately.
• The payee-trader (service provider) receives an instant notification of the payment made and can deliver the goods. The funds are immediately available in the trader's account and can be used.

The application allows you to connect to reward programs and gives an overview of received payments and other information.

Is it possible to make an instant payment using the address book from your mobile phone?

Initiating a payment by entering the payee's IBAN account is not user-friendly for instant payments that imply an extremely simple user experience, and in real time. At the same time, the payer may not even know the IBAN of the payee.

Instant payment solutions often allow users to make payments by using their known payee selection data – for example, the payee’s mobile phone number (from their mobile phone directory), the payee’s email, etc.

In order to facilitate instant payments, a unique identifier database, the so-called Register of Indirect Account Identifiers (RPIR), has been created, which connects the contact details of the payee (for example from a mobile phone directory) with his or her account IBAN.

What is the RPIR and on what basic settings is this database of payment service users used?

In parallel with the development and preparation for the operation of the new payment system at the initiative of the banking community, a Register of Indirect Account Identifiers was developed. It is a unique database in which, with the consent of the user, data on mobile phone numbers, e-mails or PINs and the corresponding IBAN accounts of the payment service user can be stored.

The establishment of the RPIR database makes it easier to place payment orders by means of an 'intermediate account identifier' (PIR), so that instead of entering the payee's IBAN account, the payer simply selects the payee's mobile phone number from its address book, which is then connected via the RPIR to the payee's own IBAN account.

This facilitates and speeds up the setting of payments that can be made without knowing the IBAN of the payee’s account.

How to use the RPIR database for a bank service user:

• The bank must obtain prior consent from its payment service user that other payment service providers (RPIR users) may also obtain information on the IBAN, first name and surname/company name on the basis of the PIR.
• Payment service providers (RPIR users) may use the register data of payment service users only for the purpose of executing their services on behalf of their service users.
• The data in the RPIR is always provided and the bank is responsible for the accuracy for its service user.
• For its service user, the Bank registers the service user in the RPIR, which implies entering data in the RPIR: IBAN, with first and last name/company name.

Example of consumer payment initiation in mobile banking:

• During the initiation of the payer’s payment order, the payer selects the payee as a person from the directory (index) on his mobile phone or his or her telephone number.
• The payer’s bank checks in the RPIR whether the selected payee from the mobile phone directory (index) is registered in the RPIR.
• The RPIR links the payee's mobile phone number to the payee's account IBAN and the payer's bank receives information about his or her account IBAN.
• After the payer's bank receives the payee's account IBAN data, it creates/prepares a payment transaction for the payer (using the received payee's account IBAN data).
• The payer (usually through an application payment solution) authorizes the prepared payment transaction and the payment is carried out.
• The condition for making an instant payment using the RPIR database is that the payer’s bank and the payee’s bank are participants in the NKSInst payment system and that the payee is registered in the RPIR.

The RPIR database is aligned with the Standardised Proxy Lookup (SPL) standards - a single European database developed by the European Payments Council for the purpose of interoperability at the EU level, i.e. the ability to initiate payments to any payee within the European Union through the use of the database.

How are instant payments initiated via QR code?

At the initiative of banks, the development of a solution to facilitate the initiation of payments using a QR code is underway.

In order to bring such solutions to the market, it is necessary to develop a comprehensive solution in the relationship between the payer’s bank – the payer-buyer (service user) – the payee-trader (service provider) – the payee’s bank, which would be acceptable to the market.

Setting up instant payments by reading the QR code is possible through mobile phone payment applications, and the user experience is based on application solutions.

Such solutions are already in use in the European Union market.

The application of the QR code in everyday payments, for example when shopping at retail stores, would be done according to the following:

• When paying for an invoice in stores, the buyer (payer), in addition to other forms of payment (cash, payment card), could also settle his account through a payment application on his mobile phone.
• If the payer chooses such a payment by scanning the QR code produced to him by the merchant through a POS, another technological device or otherwise, the order is immediately generated in the payer’s application and after authorisation, the payment transaction is executed to the credit of the payee’s account.
• Cross-border instant payments

From 20 June 2023, EuroNKSInst will connect to the European Central Bank's TIPS system and it will be possible to receive SEPA instant transactions from payers from other EU member states.

Over time, the possibility of making instant payments to payers in other EU Member States will also develop.