European Commission proposes law for EUR instant payments

Wednesday 26 October 2022 15:17 CET | News

The European Commission has adopted a legislative proposal to make instant payments in euro, available to all citizens and businesses holding a bank account in the EU and in EEA countries, according to the official press release. 


The European Commission has adopted a legislative proposal to make instant payments in euro, available to all citizens and businesses holding a bank account in the EU and in EEA countries, according to the official press release.


Reportedly, the proposal aims to make instant payments in euro affordable, secure, and processed without hindrance across the EU. 

What the Commission thinks about instant payments – ‘from mail to e-mail’

According to the European Commission, instant payments allow people to transfer money at any time of any day within ten seconds, making them much faster compared to traditional credit transfers, which are received by payment service providers only during business hours and arrive at the payee's account only by the following business day, which could take up to three calendar days. 

The Commission believes that instant payments increase speed and convenience for consumers, for example when paying bills or receiving urgent transfers (e.g. in case of medical emergency). In addition, they help to improve cash flow and encourage cost savings for businesses, especially for SMEs, including retailers. They free up money currently locked in transit in the financial system, the so-called ‘payment float', which can be used sooner for consumption or investment (almost EUR 200 billion euro are locked on any given day, the European Commission declares). However, at the beginning of 2022, only 11% of all euro credit transfers in the EU were instant, reportedly. The European Commission's proposal aims to remove the barriers that prevent instant payments and their benefits to become more widespread.

According to the Executive Vice-President for an Economy that Works for People, ‘instant payments are fast becoming 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. People gain more choice and convenience, businesses gain better control of their cash flow and lower operational costs. Today's proposal will strengthen our economy, make it more efficient and help it to grow’.

The Commissioner for financial services, financial stability, and Capital Markets Union, said: ‘Moving from “next day” transfers to “ten seconds” transfers is seismic and comparable to the move from mail to e-mail. Yet today, nearly nine out of ten credit transfers in euro are still processed as traditional ‘slow' transfers. There is no reason why many citizens and businesses in the EU are not able to send and receive money immediately, the technology to provide instant payments has been in place since 2017. This facility to send and receive money in seconds is particularly important at a time when bills for households and SMEs are increasing and every cent counts. This initiative will directly benefit EU citizens and businesses.

What does the instant payments law proposal envision?

The proposal, which amends and modernises the 2012 regulation on SEPA (Single Euro Payments Regulation), consists of four ‘must-haves’ regarding euro instant payments:

  • Making instant euro payments universally available, with an obligation on EU PSPs 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 PSPs 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 to alert the payer of a possible mistake or fraud before the payment is made.

  • 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 PSPs will verify, at least daily, their clients against EU sanctions lists, instead of screening all transactions one by one.

The European Commission's press release concludes by stating that this proposal will support innovation and competition in the EU payments market, in full conformity with existing rules on sanctions and fighting financial crime. It will also reportedly contribute to the Commission's wider objectives on digitalisation and open strategic autonomy. This initiative aligns with the Commission's priority of delivering an economy that works for people and creates a more attractive investment environment.

How does the payments ecosystem feel about this?

The European trade association of bank-independent Third Party Providers (TPPs) under PSD2 and beyond (ETTPA) released an official response shortly after the European Commission's announcement, stating that it welcomes the legislative proposal for a regulation on instant payments. 

ETPPA commends the Commission’s proposal for mandating retail banks to enable not just reachability, but also outgoing instant payments and - most importantly - to remove any premium fees over standard transfers, which means that they will be free in most cases. This is crucial to ensure that the true benefits of instant payments can be made available to all EU consumers. ETPPA would call on the co-legislators to support this mandate and to ensure the certainty of instant payments, thereby future proofing the EU’s retail payments market so that it can compete globally, as stated by the official press release from ETPPA.

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Keywords: instant payments, regulation, SEPA
Categories: Banking & Fintech
Companies: European Commission
Countries: Europe
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