Unsung Heroes – the Standardized Procedures

Required knowledge

• In-depth knowledge of payment processes
• Familiarity with the structural elements of the QR-bill

Last year, the Swiss financial center showed once again that it can successfully implement a major undertaking. With the QR-bill replacing payment slips, a smooth changeover was achieved that affected millions of households and thousands of companies in addition to banks and their service providers. A few months after this joint effort, we can see that payments made via QR-bill work easily and efficiently.

But what made this change so significant? After all, it can’t have been the lack of color on the new slip or the banal implementation of the information in a QR code. This is where the standardized procedures come into play. The success of Swiss payment transactions and the fact that, in contrast to other countries, the payment of invoices here already mainly involves a simple account-to-account payment are no coincidence. There is certainly a basic trust that the other party will pay their debt on time. In addition, the favorable and extremely reliable infrastructure with the SIC RTGS system is important, but so is the very simple, efficient, and proven procedure for exchanging payment information and the invoice reference.

Incoming Payments as Central Business Transactions

When it comes to payment transactions, most people focus on making payments, i.e., placing orders. However, receiving credit is just as important. Receiving one’s salary, pension or pocket money is not only a pleasure but mostly a necessity. Besides that, the original goal of a company is to earn money. In our consumption-oriented society, receiving a payment is a central business transaction. Public administration is also kept alive by taxes and fees, which at some point reach the responsible office’s account.

While a private individual usually has a manageable number of incoming payments, commercial companies, property management companies, and service providers in general can receive hundreds or thousands of payments per month. These are not just large providers such as telecom or insurance companies. From cleaning companies and local Internet providers to specialized mail order companies and magazine publishers – hundreds of thousands of SMEs issue countless invoices and depend on being able to quickly and easily check if and when each receivable has been paid.

Thanks to standardized procedures, this can be done easily, efficiently, and cost-effectively in Switzerland for both large and small volumes. The key to success is the unique reference that the invoice issuer creates and forwards with the payment instruction details. What worked flawlessly with the orange payment slips also works with QR-bill, as the process behind the reference remains unchanged.

This means that invoice issuers can use the payment section of the QR-bill to provide a reference that is unique to them. The payer reproduces this reference when recording the payment, regardless of the channel used for this purpose (online/mobile banking, hard copy, or accounting software). The special feature of this reference is that it can be formally checked and requires that the QR-IBAN must always be accompanied by a QR reference when used. Otherwise, the bank will reject the order. In the ISO 20022 message, this reference is part of the “Structured Remittance” element.

A special feature of the SIC system compared to many systems and schemes abroad is that it also checks if a payment instruction from a bank (pacs.008) contains a formally correct QR-bill if the payment goes to a QR-IBAN. This way, the recipient bank and the beneficiary can be sure that the payment of their receivable always contains a correct reference.

The beneficiary’s bank, in turn, can build its own services based on these receipts. However, part of the standardized procedures is the possibility to collect and be separately notified about incoming payments with a specific message type (camt.054). The advantage of this is that the beneficiary can transfer only the required information to its accounts receivable department. Anything else on the account should or must not be pas-sed on. Conversely, the accounting or treasury department does not want to have all bookings listed in the account statement (or in camt.053) – this would be annoying and unnecessary, especially for trading companies with many incoming payments.

If recording payments with QR-bill is too cumbersome, you can switch to eBill. That's because eBill is based on the same processes and supports the QR-IBAN and the QR reference. Instead of the customer having to create a payment instruction from the invoice, eBill does it in the background. For invoice issuers, this means that regardless of whether they send a QR-bill directly to the customer or initiate an eBill invoice, the payment process will be validated in the same way and the notification for the incoming payment will be exactly the same. So, there is no need to transition to eBill. Instead, eBill is the next logical step on the path towards simpler and more reliable invoicing. An eBill invoice can also be created from the data of a QR-bill.

An Ideal Basis for Instant Payments, Too

The deposit slip with reference number procedure (VESR) was introduced in 1971. The reason why the system of standardized procedures has lasted so many years is because it is simple, efficient, and reliable to use. The procedure also lends itself to being updated again and again for a new technical implementation. Both the implementation of ISO 20022 messages (pain.001, pacs.008, camt.05x), which took place not so long ago, and the replacement by QR-bill went smoothly. In order to achieve this, some old habits had to be carried forward. For example, the introduction of a specific QR-IBAN via a QR-IID is certainly not the most elegant solution, but the existence of a specific account number is the most efficient solution for validation from the recording of a payment to payment receipt. And the QR-IID was again the easiest way to achieve this. The fact that this also makes it easier to make payments from abroad without a valid reference is an unattractive, but ultimately negligible side effect. And as ISO 20022 becomes more widespread, there may even be more fully and correctly filled-in cross-border incoming payments.

The imminent introduction of instant payments in Switzerland is much more significant. Instant payments are ideal, especially for services where an immediate cash flow makes sense or is more cost-effective, such as when topping up credit – like when your godchild wants a new Nintendo Switch game for their birthday and receives the money for it right after blowing out the candles. The standardized procedure is an ideal basis for this. The QR-IBAN and the QR reference are also provided for instant payments, as are the associated validations. The type of notification the beneficiary receives likely needs to be adapted. If there is a need, the ISO 20022 PT Switzerland working group will consider this and develop corresponding implementation guidelines for the SPS 2024 standard release (November 2024) at the earliest. One thing is clear: It remains exciting, because the history of standardized procedures is still being written after more than 50 years.

Martin Walder
Head Billing & Payments Standards, SIX