Instant payments are here: Milestone vote by European Parliament

09 / 02 / 2024

Marking a pivotal moment in European payments, the European Parliament has endorsed the regulation mandating instant payments, requiring credit transfers to be executed within ten seconds across the EU. This endorsement paves way to the approval by EU Finance Ministers in Council, with the final text anticipated to be published in the Official Journal of the European Union (OJEU) by March 2024.

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womand holding a mobile phone to complete a payment

Banks and payment service providers (PSPs) will be obliged to adhere to the regulation, ensuring that both EU citizens and companies receive the benefits associated with instant payments. It is a significant milestone, heralding instant payments as the new normal across the EU. The final text was endorsed with overwhelming support: 599 votes in favour, 7 votes against and 35 abstentions, as also communicated in the original press release.  This conveys a robust political statement, indicating Europe’s commitment to the digital transformation of its financial landscape.

From the European regulator perspective, there is a clear intent to accelerate the adoption of instant payments and ramp-up in contrast to the current status quo. It is one of the key initiatives to solve the sovereignty issue in the European payment landscape. An exemplary counterpart is the simultaneous focus on the European Payments Initiative (EPI), where Worldline also takes a leading role as the largest payment processor in Europe.

The instant payments regulation imposes significant pressure on the industry to ensure compliance, aiming to mitigate hurdles that hinder widespread adoption. To address the key obstacles, the regulation introduces the following measures: elimination of premium pricing, comprehensive reachability, verification of payee for fraud prevention, transition from transaction-based to daily customer sanction screening for frictionless processing, and the mandatory provision of instant bulk payments to corporate clients.

An additional critical aspect to the regulation is the implementation timeline. Adhering to these compliance obligations within the stipulated time frame is essential to avoid penalties:

9-month deadline:

  • Eurozone banks to receive instant payments
  • Eurozone PSPs to implement pricing in line with regular credit transfers
  • all EU PSPs to implement entity-based sanctions screening

18-month deadline:

  • Eurozone banks to send instant payments
  • Eurozone PSPs to support payee verification service

33-month deadline:

  • Non-Eurozone banks to receive instant payments within business hours
  • Non-Eurozone PSPs to implement pricing in line with regular credit transfers

36-month deadline:

  • Eurozone non-bank PSPs (PIs and EMIs) to send and receive instant payments
  • Non-Eurozone non-bank PSPs (PIs and EMIs) to receive instant payments

39-month deadline:

  • all non-Eurozone PSPs to send instant payments within business hours
  • all non-Eurozone PSPs to support payee verification service 

Examining the broader context within the European banking industry, the situation is twofold. Large banks, representing over 90% of payment accounts, already provide instant payments and are required to adjust their procedures and services to align with the regulation. Meanwhile, a substantial number of smaller or specialized banks, constituting less than 10% of payment accounts, will also need to implement instant payment service capabilities.

Moreover, the European Payments Council (EPC) and European Clearing and Settlement Mechanisms (CSMs) must adhere to the deadlines that surpass the usual pace and timelines for deploying industry-wide changes. For example, within Worldline’s settlement communities, there are specific features, such as time-critical instant payments (end-to-end processing in 5 seconds) / non-time-critical credit transfers, to be addressed within the broader framework of the regulatory alignment. Worldline adheres to the standards set by the respective owners of the community-specific features and adapts its CSM as required. 

For banks already providing instant payments, it is necessary to prepare for changes in the process as well as the anticipated surge in transaction volumes. Worldline supports its clients and partners with these changes with comprehensive and scalable services across the entire value chain. This includes services to support the verification of payee, customer screening and bulk instant payments, which are also packaged as standalone products that may complement the legacy processing at all banks already providing instant payments.

Conversely, for banks lacking readiness for instant payments, the challenges extend beyond the implementation of instant payments itself, encompassing broader aspects such as transitioning to 24/7/365 low latency client positions, fraud and sanction checks. In anticipation of these complexities, Worldline has defined packaged products for banks and PSPs to adopt instant payments at minimal cost and disruption. In particular, Worldline’s stand-in account and fund check mechanism takes over the core banking in supporting the instant payment process, avoiding drastic changes to the legacy infrastructure.

With an average of over 2 million instant transactions processed daily, Worldline is an ideal partner to support your success in implementing the mandatory changes within the compulsory deadlines.

Learn more about Instant Payments and Beneficiary IBAN Name Check. Discover all of our solutions for Financial Institutions.

 

Sheri Brandon

Chief Market Officer, Northern & Western Europe, Worldline
Sheri currently is the Chief Market Officer for the Northern and Western region within Worldline Financial Services and has been with the company since 2020. Sheri has been in payments her whole career and was at the base of shaping the rulebooks for Sepa payments and the cards framework. Sheri holds a BSc in computer science and is a strong believer that technology makes everything better and that this has been the big driver in shaping the payments industry to where it is today.