Financial institutions, including payment and electronic money institutions (PIs and EMIs), can benefit from many advantages when accessing SEPA as a SEPA indirect participant.
These advantages include having their own BIC and issuing their own IBANs, increased control over their payment flows, and lower payment fees.
Europe’s largest commercial banks usually offer SEPA indirect participation services to PIs and EMIs by acting as their sponsor banks.
But one bank stands out when it comes to offering SEPA indirect participation for PIs and EMIs, with a staggering 58% market share: the Bank of Lithuania, Lithuania’s central bank, via its service CENTROlink.
Launched in 2015, CENTROlink is the Bank of Lithuania (BoL)’s gateway to SEPA.
In other words, via its service CENTROlink, the Bank of Lithuania acts as a SEPA sponsor bank for PIs, EMIs, and credit institutions looking to operate as SEPA indirect participants.
CENTROlink is the commercial offer and the technical system enabling financial institutions to access SEPA through the Bank of Lithuania.
CENTROlink’s success among European PIs and EMIs comes partly from its relatively competitive and, perhaps most importantly, public pricing, but also and mostly from Lithuania’s government's massive push to attract European fintech companies to the country.
CENTROlink offers its customers access to all SEPA payment schemes: SCT, SCT Inst, SDD Core, and SDD B2B.
CENTROlink offers connectivity options comparable to most commercial banks for PIs and EMIs to integrate with the exchange of SEPA messages in XML files.
Most PIs and EMIs aren’t used to working with these technologies, so selecting the best solution to connect to CENTROlink is critical.
In this section, we break down the main elements to have in mind when evaluating the best solution to connect to CENTROlink’s SEPA gateway.
SEPA and the regulations and rules around SEPA payments are regularly evolving to bring new payment capabilities to the market, increase the adoption of specific payment methods, and reduce fraud.
New European legislations are expected to be adopted in early 2024 that will require all PIs, EMIs, and banks to support SEPA instant credit transfer and IBAN verification by the end of 2024 and 2025.
When selecting the solution to connect to CENTROlink, it is important to factor in how much effort supporting these new capabilities and requirements will take.
SEPA rulebooks define the specifications of SEPA payment flows and messages exchanged between banks and other SEPA participants and clearing and settlement mechanisms – the systems at the heart of SEPA.
In addition to functional and regulatory changes, the EPC publishes new rulebooks for each SEPA scheme every other year, which include primarily technical modifications to SEPA payment flows and messages.
For SEPA participants, making these changes implies months of analysis, design, development, tests, and certifications to ensure said changes do not break payment systems, no matter the volume of payments processed and the edge cases encountered.
SEPA rulebook updates often impact SEPA indirect participant’s integrations with their sponsor bank.
CENTROlink customers, therefore, need to account for these changes and how they will manage them when selecting their CENTROlink connectivity solution.
In most cases, PIs and EMIs are required to safeguard their customer funds in a segregated account at a credit institution.
While Bank of Lithuania offers safeguarding accounts for CENTROlink customers, these institutions might want – or be required to – safeguard customer funds with local banks in the country they operate. They might also want to leverage better conditions of remuneration of deposits commercial banks can offer them. To do so, they must integrate with said commercial banks.
Building a multi-bank payment infrastructure also brings PIs and EMIs additional benefits, including expanding internationally and accessing local schemes, building redundancy in their infrastructure and fighting IBAN discrimination with local IBANs.
Selecting a CENTROlink connectivity solution that already comes with such integrations therefore dramatically accelerates time-to-market and simplifies payment operations as they will be centralised in a single platform.
Accessing SEPA through CENTROlink means becoming a SEPA indirect participant. This mode of access to SEPA involves numerous advanced payment workflows and technical requirements, notably R-transactions.
Therefore, the ideal CENTROlink connectivity solution should natively support all these R-transactions-related workflows to simplify the CENTROlink customers’ payment operations.
Human oversight and intervention will always be required in SEPA payment operations, whether to optimise payment workflows, investigate and solve incidents, answer customer support requests, or ensure easy, cross-team visibility on payments.
To ensure this visibility and control, a CENTROlink connectivity solution should come with a built-in dashboard that enables finance and operations teams to perform these actions easily.
Reconciliations are a critical workflow in PIs and EMIs operations. They ensure compliance and adequate safeguarding workflows and play a vital role in the end-customer experience.
Yet automating reconciliations at scale for payment use cases is complex, especially when dealing with SEPA bulk settlements.
A complete CENTROlink connectivity solution capable of automating all PIs and EMIs payment operations should include reconciliation capabilities.
In this section, we explore the main solutions to connect to CENTROlink and their respective pros and cons.
When considering a CENTROlink integration, a PI or EMI can decide to design and develop it in-house.
A benefit of doing so is that the solution will be tailored to the specific needs of the PI or EMI.
However, building a bank integration, including a CENTROlink integration, is a complex and risky project. And CENTROlink customers should also consider the cost and time to build the tools to operate their payments on top of this integration in an efficient and compliant manner.
As mentioned above, SEPA rulebook updates and new regulations and schemes often require maintenance of existing integrations. A PI or EMI deciding to build its CENTROlink integration in-house should factor in the time and resources that will be required to perform this maintenance over the years.
Technology providers such as Inventi, Fininbox, or Paysolut (now discontinued after its acquisition by SumUp) are specialised in selling SEPA gateway solutions to financial institutions through integration with CENTROlink.
However, they usually focus on CENTROlink connectivity and do not offer automation, advanced dashboard, and reconciliation capabilities on top of their integrations.
Being specialised in CENTROlink, they also do not offer integrations with commercial banks (or a very limited number of them) to allow adequate safeguarding workflows, access to non-SEPA payment schemes or redundancy across partner banks. It leaves the development of these integrations to their customers.
Numeral is a payment technology provider. We provide the infrastructure for fintechs to connect to partner banks, access schemes, and automate payment operations.
This includes the full support of SEPA indirect participants' needs, from connectivity to CENTROlink (or any other sponsor bank) to payment and reconciliation automation and a comprehensive dashboard.
Numeral already supports leading SEPA indirect participant PIs and EMIs such as Spendesk, Alma, Swile, and CENTROlink customers. We have a track record of fully supporting our customers even when SEPA rulebook updates go wrong, limiting the impacts on their operations.
In addition to our CENTROlink integration, we integrate with dozens of European commercial banks and enable our customers to easily run their payment operations across multiple partner banks. With this multi-bank infrastructure, you benefit from the safeguarding arrangements of your choice, but also redundancy into your payment infrastructure, access to non-SEPA payment schemes and local IBANs.
If you are looking to integrate with CENTROlink or would like to evaluate the benefits of changing your existing setup, contact us.