a reputation for being one of the world’s most efficient. But there
is always room for improvement, reveals a study highlighting the
significant benefits a real-time payments system would bring in
terms of increased efficiency and substantial cost savings.
One of the world’s most
mature electronic payments markets, Belgium began the transition to
a centralised electronic payment system in 1974 with the
establishment of the Centre for Exchange and Clearing (CEC) a
not-for-profit unit of the country’s central bank, the National
Bank of Belgium (NBB).
Focused on retail transactions, the CEC handles transfers of up
to €500,000 ($680,000), cheques of up to €50,000, all debit and
credit card transactions and payments using PROTON, a
smartcard-based electronic purse launched in May 1996. Following a
truncation process pioneered by the CEC in 1974, all payment orders
submitted on paper (cheques and about half of all transfers) are
archived and microfilmed by the remitting bank.
According to the NBB, the CEC is responsible for 99.75 percent
of the volume of interbank payments in Belgium, but only 2 percent
in value terms. In 2007 the CEC processed an average of 4 million
payments a day, representing a daily total value of almost €3
Large value payments are processed via the pan-European Target2
system which, in February 2008, replaced Belgium’s former real-time
gross settlement system the Electronic Large-value Interbank
Payment System which had been in existence since 1996.
In Belgium’s electronic retail payments market credit transfers
are the most significant instrument, with the NBB recording a total
of 897.6 million transactions in 2007. This accounted for 42.8
percent of a total of 2.099 billion non-cash payments, though this
was down from 47.2 percent in 2000.
Strongest growth has been in the use of debit cards which in
2007 recorded total a transaction volume of 764.2 million or 36.4
percent of total volume. This compared with 380 million
transactions in 2000 when debit cards accounted for 27.3 percent of
total transaction volume. Between 2000 and 2007 the number of debit
cards in issue increased from 10.96 million to 13.72 million, the
latter figure representing 1.32 cards per Belgian inhabitant.
Growth in the use of debit cards continued in 2008 with Atos
Worldline, a wholly-owned subsidiary of French information
technology conglomerate Atos Origin, reporting a 7.9 percent
increase in transaction volume.
Atos Worldline is responsible for management of Belgium’s ATM
and electronic POS network, its duties including monitoring of
bank-issued cards and the generation and transmission to customers
of PIN codes for all bank cards. Atos Worldline also participates
directly in the CEC and acts as an exchange for all ATM and POS
operations cleared in this system.
Atos Worldline came into being in December 2006 following
completion by Atos Origin of the acquisition of the bank-owned card
payment processing networks Banksys and Bank Card Company.
Credit cards have made inroads into the Belgian market with 3.77
million in issue at the end of 2007, up from 2.97 million in 2000.
In terms of cards in issue this increase left credit cards holding
an almost unchanged share of the total card market: 21.3 percent in
2000 and 21.6 percent in 2007.
In terms of value of transactions debit cards continued to make
inroads between 2000 and 2007, though more recently they have lost
ground to credit cards.
Over the full seven-year period total debit card transaction
volume grew at a CAGR of 10.4 percent reaching €38.52 billion in
2007. Spending on credit cards during the period recorded a CAGR of
6.6 percent, rising to €10.24 billion in 2007.
However, between 2005 and 2007 growth in the value of credit
card transactions accelerated, increasing at a CAGR of 14.6 percent
compared with a CAGR of 8.8 percent recorded by debit card
transactions. Atos Worldline reported that the value of credit card
transactions in 2008 again exceeded that of debit cards, increasing
by 8.6 percent compared with 2007.
Atos Worldline accounts for the distribution of the majority of
Visa and MasterCard cards and is responsible for the processing and
authorisation of transactions executed using the cards.
Debit and credit cards volumes exclude transactions via PROTON
cards. While these cards have not achieved widespread adoption,
Atos Worldline noted that they still retain a “loyal following”
with 1.5 million cards in active use at the end of 2008. Atos
Worldline reported that total PROTON card transaction volumes
declined by 9.2 percent to 94 million in 2008. The PROTON card can
be loaded with amounts ranging from €2.5 to €125.
Unsurprisingly, the use of cheques in Belgium has fallen sharply
in recent years, particularly as a retail payments instrument, with
data from the European Central Bank showing that the number of
cheques processed annually fell from 70.7 million to 10.6
The value of transactions fell at a slower pace, from €86.78
billion to €63.17 billion, reducing cheque payments from 1.7
percent to 1.5 percent of the value of Belgium’s total non-cash
Room for improvement
In many respects Belgium has
made significant strides in making efficiency gains in its payments
system and is one of the most efficient in the world, notes a
recent study of the country’s payment system undertaken by UK
payments processor VocaLink. But stressed the study’s authors:
“Further improvements are possible.”
Their particular focus was on the CEC. At present this is a net
settlement system which transfers once a day (between 15.00 hours
and 15.15 hours), net settlement balances to TARGET2. Settlement
happens, at the maximum, 24 hours after the payment exchange
Specifically the authors of the VocaLink study argue that
Belgium’s payments system and the economy in general could achieve
considerable efficiency gains if a real-time system such as the
UK’s Faster Payments Service were to be adopted.
“The introduction of real-time technology has the potential to
improve efficiency by allowing instant delivery of payments through
a number of channels, including mobile phones and the internet,”
stress the authors.
In the study VocaLink attempted to quantify the economic
benefits of a real-time payment system in Belgium. To this end
VocaLink enlisted the help of the Centre for Economic and Business
Research (CEBR), an independent economics and business
Benefits of real-time payments are grouped into five categories
which the authors believe to be the main, but not the only,
benefits. The five benefits are:
• Reduced cost of managing payments;
• Migration to more efficient transaction types;
• Reduction in failed transactions;
• Fraud reduction; and
• Increased efficiency for users.
The study considers a “base case”, in which Belgium does not
introduce real-time payments and two scenarios in which Belgium
adopts real-time payments in 2010.
In the first real-time payments scenario steady growth is
achieved in the credit transfer, direct debit and debit card
markets before a full change to real-time payments is mandated in
In this scenario introduction of real-time payments is assumed
to accelerate the decline in the use of cheques but not entirely
In the second real-time payments scenario volumes grow more
quickly. By 2014 all credit transfers, direct debits and debit card
payments are assumed to be migrated to the real-time platform and
the use of cheques entirely curtailed by 2015.
Elimination of cheque use is significant as, noted the study’s
authors, processing costs based on research conducted in Norway are
estimated at about €2.91 per cheque.
In the study it is estimated that cheques will cost a total of
€25.5 million to process in 2010 in the absence of a real-time
The authors continued that cheques are followed by credit cards
with a unit cost of €2.62. PROTON and debit cards cost €0.54 and
€0.55 respectively (2003 prices), credit transfers are estimated to
cost €0.06 per transaction and direct debits are estimated at €0.08
“Introduction of real-time payments, and the associated move to
self-service, has the potential to cut costs significantly for
banks at either end of the process,” noted the authors. For
example, the cost per transaction for credit transfers and direct
debits is estimated to fall to €0.05, reductions of 16.7 percent
and by 37.5 percent, respectively. Debit card unit costs are also
likely to be reduced by an estimated €0.03, or 5.5 percent.
Savings from reduced transaction costs on credit transfers,
direct debits, debit cards and falling use of cheques in VocaLink’s
second scenario (rapid uptake) savings in reduced transaction
processing costs are estimated at €3.5 million in 2010, €74.1
million in 2015 and €88.7 million in 2020. The saving in 2020
represents a 7.4 percent saving compared with costs under
VocaLink’s base case.
In its first real-time payments scenario (slow uptake)
transaction cost savings are estimated at €3.5 million in 2010,
€41.1 million in 2015 and €86.3 million in 2020, the €2.1 million
lower savings than in the second scenario being a result of the
lingering use of cheques. The saving in 2020 represents a 7.2
percent saving compared with costs under VocaLink’s base case.
Eliminating failed transactions
While significant, transaction cost savings almost pale into
insignificance when compared with costs reductions that can be
achieved by eliminating failed transactions even in a payments
system as efficient as Belgium’s.
“The present central infrastructure in Belgium ensures that many
payments with errors are detected early,” noted the study’s
authors. They added that the rate of payments failing at the final
stage when a central infrastructure is used can be as low as 0.11
percent to 0.13 percent.
“While this is commendable, the instantaneous and self-service
nature of real-time payments has the potential to reduce the
failure rate in final stage of payment to zero,” continued the
“This is a unique advantage of a real-time environment,” they
Notably, in a study conducted in 2004 US software developer
SunGard estimated the cost of investigating failed payments at
€58.52 per item.
In VocaLink’s second, rapid uptake scenario costs savings
flowing from reduction of failed transactions are estimated at €185
million in 2015 and €249 million in 2010. In both years a failure
rate of 0.1 percent was assumed. At a failure rate of 0.15 percent
the saving would be €278 million in 2015 and €373 million in
In its slow-uptake, first scenario VocaLink estimates that a
real-time payments system would reduce costs of failed payments by
€111 million in 2015 and €240 million in 2020.
Users also benefit from real-time payments, with VocaLink
estimating that in Belgium these could be worth €37 million in 2015
and €51 million in 2020 under its rapid uptake scenario. Under the
slower uptake scenario benefits are estimated at €22 million in
2015 and €51 million in 2020.
In economic terms VocaLink estimates that savings flowing from a
real-time payments system would boost Belgium’s GDP by 0.11 percent
in 2020 under the slow uptake scenario and by 0.22 percent under
the rapid uptake scenario.
The UK’s Faster Payments Service is experiencing what the MD of
VocaLink Europe Paul Taylor termed “remarkable interest” from other
Given Belgium’s history of being in the forefront of payments
innovation it would not be surprising if it were one of those
Estimated cost savings and user
Total cost benefits
* Launched 2010. By 2015 all credit