Do you know that until October 2024 the Electronic Clearing System of Latvia, EKS was available only to credit institutions and the Treasury?
Latvijas Banka has announced a landmark decision that non-bank payment service providers can now become a part of this critical financial infrastructure changing the face of payment services in the country.
This is one of the most dramatic changes in the financial sector of Latvia that promises to revolutionize how payments are processed and managed across the nation. Considering this, here we are clearing all your doubts about it including
- What is Latvia’s Electronic Clearing System (EKS)?
- Why is this change important for payment services?
- How does this benefit businesses and consumers?
- What are the requirements for joining EKS?
- What does this mean for Latvia’s financial future?
- What would be the influence on the already existing payment service providers?
- How many layers of security are there?
As the European financial sector is progressing, so does Latvia. Latvia’s electronic clearing system (EKS) is the country’s central payment infrastructure. It handles both SEPA instant and standard payments. The system serves all countries within the European Union and European Economic Area.
Therefore, it follows the new European direction that emphasizes having more open financial systems which consist of traditional as well as innovative payment service providers offering financial solutions like Verification of payee (VoP).
What is the Latvia EKS System?
Latvia’s electronic clearing system is the central payment system for SEPA instant and standard payments in all the European Union and European Economic Area countries. It is an extremely robust infrastructure, so it forms the back of all financial transactions that occur in the country to ensure swift and secure payment processing.
The system was closed and access to these basic payment services required that non-bank payment providers go through intermediary banks. This added layer has proven inefficient, costly, and has restricted the development of innovation in the market.
Who Can Access the EKS?
The system now opens its doors to the following:
- Licensed payment institutions
- Electronic money institutions
- Credit unions
This will put all the payment service providers on an equal footing, ensuring healthy competition and innovation in the financial sector. Various types of institutions bring different strengths and perspectives into the payment ecosystem, enriching the overall service offering that is available to Latvian businesses and consumers.
Benefits for the Financial Ecosystem
Efficiency
The direct access to EKS brings several advantages:
- Fewer steps to process a transaction and done in seconds instead of hours
- It eliminates intermediary steps that could potentially cause delays or failure
- Improved cash management with real-time visibility of payments
- Improved operational processes through minimal intervention
- Improved reconciliation capabilities through direct system access
- Better transaction tracking and monitoring capabilities
Cost Benefits
Businesses and consumers can benefit in the following ways:
- Lower transaction costs since they are transacting directly through the system, eliminating intermediary fees.
- It also assists the market for more price-competitive plans since directly the service providers contend with one another.
- Through automation of processes, one is helped to reduce operational cost.
- An improvement in the ability to manage the liquidity capacity is also key.
- Cutting down on much manual process assists in saving funds.
- Through saving money, improved value gets derived from cash services from payment.
Innovations Boost
The increased diversity in providing payment for special needs purposes will prevail
- Improved competition shall lead the innovation process
- Improved services from modern platforms
- Available sophisticated payment products
- Installation of state-of-the-art security features are integrated
- Invention of new payment products and services
Technical Implementation and Security
Connecting to the EKS platform requires meeting strict technical and operational standards to ensure system integrity. These include:
Technical Requirements
- Good IT infrastructure that meets the EKS requirements
- Secure communication channels
- Real-time processing
- Disaster recovery and business continuity
- Regular system testing and maintenance
- International security standards compliance
Security Measures
- Advanced encryption protocols
- Multi-factor authentication systems
- Real-time fraud detection capabilities
- Continuous security audits and risk assessment
- Detailed incident response processes
- Active monitoring and alert systems
Legal Compliance
An institution which is involved in the system should adhere to the following:
- Latvian Banking Law
- The European Union’s directives on payment services
- Anti-money laundering regulations
- Data protection and privacy law
- Consumer protection law
- System-specific laws on operational activities
TechnoXander: Your Payment Innovation Partner
We help Financial Institutions secure Instant Payments in the New EKS Ecosystem.
As non-bank payment providers join EKS and gain access to instant payments, the need for robust fraud prevention becomes critical. TechnoXander’s Verification of Payee (VoP) solution plays a vital role in this new landscape by:
- Providing real-time account holder verification before instant payment processing
- Supporting regulatory compliance with instant payment fraud prevention requirements
- Reducing the risk of authorized push payment (APP) fraud
- Protecting both payment service providers and their customers as transaction volumes grow
- Offering an additional layer of security that complements EKS’s existing safeguards
This makes our VoP solution particularly valuable for new EKS participants who need to ensure secure and compliant instant payment processing from day one.
To learn more about how TechnoXander can help your organisation take advantage of these new opportunities in Latvia’s payment landscape, please email us at info@technoxander.com.
Key Takeaways
- EKS in Latvia is now welcoming non-banking payment service providers, this is the new way in the world of finance
- This change promotes innovation and competition with high security
- Direct access allows for speedier, more efficient payment with lower operational costs
- Technical capabilities improve delivery of services
- There is comprehensive security that upholds the integrity of the system
- The future of Latvia’s payment industry is bright with increased competition and innovation
