EC advocates a faster – and generalized – rollout of instant payments
On October 26th, the European Commission adopted a legislative proposal to make instant payments in euros widely available to all citizens and businesses holding a bank account in the EU and in EEA countries. More than just advocating the availability of such payments, the commission aims at making them affordable and secure, also ensuring they are processed without hindrance across the EU.
A welcome boost to a major technological innovation in payments
The document shared by the EC first defines the scope of Instant Payments (IPs) as a form of credit transfer whereby funds pass from the payer’s account to the payee’s in a matter of seconds, at any time, day or night, and any day of the year. These are then differentiated from other credit transfers that are processed only during business hours, with funds typically credited to the payee by the end of the following business day.
IPs represent therefore a key technological innovation, as they allow releasing funds that are locked in the financial system, making them immediately available to end users – consumers and businesses in the EU – for consumption and investment. They offer numerous opportunities for banks and fintechs to develop innovative solutions for payments at the point of interaction – physical or digital.
And even if the IPs infrastructure already exists, notably since the launch of the SEPA Inst. Scheme dating back to November 2017, only 11% of euro credit transfers sent in the EU were IPs at the end of 2021…
After PSD2 and the Regulation on cross-border payments, this proposal is consistent with the EC’s digital finance strategy for the EU, aiming at promoting digital transformation of finance and the EU economy, and removing fragmentation in the digital single market.
Key points and amendments of the proposal
- Making instant euro payments universally available, with an obligation on EU payment service providers that already offer credit transfers in euro to offer also their instant version within a defined period.
- Making instant euro payments affordable, with an obligation on payment service providers to ensure that the price charged for instant payments in euro does not exceed the price charged for traditional, non-instant credit transfers in euro.
- Increasing trust in instant payments, with an obligation on providers to verify the match between the bank account number (IBAN) and the name of the beneficiary provided by the payer in order to alert the payer of a possible mistake or fraud before the payment is made (relevant since the settlement of funds is instant).
- Removing friction in the processing of instant euro payments while preserving the effectiveness of screening of persons that are subject to EU sanctions, through a procedure whereby payment service providers will verify at least daily their clients against EU sanctions lists, instead of screening all transactions one by one.
Valdis Dombrovskis (Executive Vice-President for an Economy that Works for People) hopes that instant payments will become the norm in many countries. “They should be accessible to everyone in Europe too, so that we stay globally competitive and make the most of the innovation opportunities offered by the digital age,” he underlines.
An array of new possibilities for Fintechs, banks and end-customers
The proposition has notably been welcomed by the ETTPA, the main voice representing bank-independent TPPs. The association’s Chair, Ralf Ohlhausen highlights that “the proposal on Instant Payments will provide some of the key missing ingredients for EU TPPs and Fintechs to thrive […]. In combination with the PSD2 API infrastructure, which we implemented over the last 5 years, the proposed regulation will help enable more than 400m EU citizens in all member states, making retail payments straight from their bank account, without the need for any additional car or wallet”. He adds: “this is a great step forward towards fostering EU champions in payments services”.
At LUXHUB, we believe that this proposal goes in the right direction and towards providing customers with added value solutions. Ramzi Dziri, Open Banking Product Manager and Digital Payments expert highlights: “Account-to-account payments combined with Instant payments represents a huge improvement as more people will be able to pay in various daily life situations online or offline – without the need from additional accounts or cards – and funds will be sent/received directly therefore drastically improving their personal finances visibility”.
He concludes: “if other features are added, notably Request to Pay – which is already possible with our ONE PAY solution – corporations/public administrations and customers/citizens will greatly benefit from more accessible Instant Payments”.
Source: European Commission & ETTPA