“Here’s everything you need to know about Instant Payments”
The EU’s instant payments regulation has three key objectives: promoting the use of instant credit transfers, reducing fraud and increasing access to payment systems. Claude Meurisse and Andrei Costica had more details as to what it means for payment service providers and end users.
The European Council on 27 February 2024 adopted a new regulation that aims to ensure credit transfers can take place within 10 seconds. It includes requirements that aim to promote the adoption of instant credit transfers, reduce fraud through verification of the payee services and allow non-banking payment service providers to directly access payments systems, Allen & Overy senior associate Andrei Costica explained during an event on payments regulation organised by LUXHUBand the law firm on 18 April.
Requirements for payment service providers
Thanks to the instant payments regulation, payment service providers (PSPs) who offer the sending and receiving of credit transfers “will have in the future the obligation to also offer instant credit transfers,” said Costica, and accounts that can receive standard credit transfers “will have to be reachable 24/7.”
“Essentially, instant credit transfers will be in effect 24/7, throughout the year.”
So how exactly do these work?
Once a payer initiates a credit transfer, “the PSP of the payer will have to immediately verify–after receipt of information–whether it has all the data and all the conditions are met for the processing of the transaction,” explained Costica.
And once it does the verification and it can confirm the conditions, including availability of funds, for example, “it will send the payment transaction to the PSP of the payee. The PSP of the payee has 10 seconds, during which they have to credit–or not, in case the payment transaction does not go through–the account of its customer.” The payee’s PSP then needs to send confirmation of execution back to the payer’s PSP. In case of failure of execution, then it would need send a notification and the funds would be re-credited to the payer’s account.