BORICA about instant payments in Bulgaria: „Our ambition is to cover fifty percent of the market by the end of 2021 and ensure 100% availability of instant payments to participants within two years of the start of the service.”

The implementation of the SCT Inst standard in Bulgaria accelerated the take-up of instant payments and preparations for joining the euro area. Already 3 Bulgarian PSPs have joined the SCT Inst scheme.

The Bulgarian payment services company BORICA AD launched BLINK, its local-currency (lev) instant payments project, at the beginning of this month, according to European Payments Council (EPC). The project is compliant with the SEPA Instant Credit Transfer (SCT Inst) scheme and enables key benefits for merchants and payment service providers (PSPs) as well as enhancing the consumer experience. It will also contribute to facilitating the process of the changeover to the euro in the future.

European Payments Council interviewed Miroslav Vichev, Chief Executive Officer at BORICA AD, to share the lessons the Bulgarian community has learned while implementing the project. In addition an infographic summarises all you need to know about the Bulgarian payments landscape.

In April 2021, you launched the BLINK project to provide local services based on instant payment instruments and technologies in Bulgaria. What were the main reasons for this?

In recent years, we have carefully observed the development of instant payments in Europe, following the trends and gaining experience directly from Western European countries on approaches to implementation, scope, etc. In some countries, these projects are central bank initiatives, and in others, they were launched independently by several banks with no involvement of the public authorities. The approaches differ from country to country, which determines the variety in the scope of services – for example, a proprietary service or centralised infrastructure; one that builds on an existing payment system or is started from scratch; the speed of take-up; the set of services provided to end customers, and so on. 

We had the opportunity to study various business models and to select the optimal solution for us. We believe that central bank support, participation of major market players and good coordination among all participants are crucial for the success and speed of such a project. In Bulgaria, the interest of national institutions in the project is high.

We are fully geared up with the central infrastructure, and in the meantime, the necessary amendments to the legislative framework for the regulation of instant payments were also made.

Can you tell us about BORICA AD’s experience with this instant payments project in the last two months and about the main lessons already learned?

There has been significant interest from the banks – both big and small. They are innovative and want to be among the first to offer the service to their customers. Four banks and two other  with access rights have applied for participation in a pilot project, which means we cover the means of access to the system permissible under the rules of the BISERA6¹  payment system. Active participation in the pilot project and playing out all the test scenarios were a prerequisite for the successful launch of the service. 

After 1 April – the official starting date for instant payments in Bulgaria – every participant that has passed the certification process may offer the service to its customers in a real operational environment. In addition to the pilot banks, we have assurances from four of the large international groups operating in Bulgaria that they will join by the end of the year.

Our ambition is to cover fifty percent of the market by the end of 2021 and ensure one hundred percent availability of instant payments to participants within two years of the start of the service.

Can you tell us more about Bulgaria’s preparation for euro zone participation and the role the BLINK project may play in it? How do you see the take-up of  in Bulgaria?

As the SCT Inst standards are now fully implemented in Bulgaria, upon the adoption of the euro, banks will also be able to process instant payments in euros. The way we will switch these payments over to the euro while guaranteeing reachability for local banks to all SCT Inst banks across the euro area is a matter of making arrangements with the Bulgarian National Bank. We have already discussed with the Bulgarian National Bank what steps would be required in tandem with the adoption of the euro to ensure that our customers can make instant payments across Europe and receive such payments, which is the ultimate goal upon euro zone accession.

Finally, a broader question: what are the main characteristics of Bulgaria’s payment landscape and how do you see it developing over the next five years?

In terms of household payments, card payments are prevailing in Bulgaria: eighty to ninety percent of all transactions are by card. As regards companies, most payments are executed in the lev payments system, BISERA6, with a low percentage of international payments in euro. 

If we try to outline the picture developing over the coming five years, when instant payments are a possible option, we expect a majority of companies to change over from standard batch payments to instant payments to ensure faster movement of their money. This natural migration typically reaches up to twenty to thirty percent of payments in Western Europe, but this does not change the overall model.

To what extent this would happen in Bulgaria would depend on the way in which the banks offer the service to their end-customers. Not all business models need payments within ten seconds. However, consumer payments – where the end-customer can pay instantly – are a different matter. In this case, it is a matter of gradually changing the model from card to instant payments.

We believe the popularity of this type of payment will increase at a particularly quick pace given all their advantages – a service that is more advantageous for the banks, has higher speed, is easy to use, offers the possibility to pay only based on a phone number, etc.

In addition, we expect them to enter market niches where only cash payments have been used so far, and that will increase the volume of electronic payments in general. At what rate these processes will happen in Bulgaria will depend on the speed of adoption of the euro domestically and on the development of similar projects across Europe, as we are all part of a single ecosystem. 

^{1. Bank integrated system for processing of customer payments in Bulgarian levs.}