EU’s Instant Payments Deadlines Loom With Challenges for X-Border Payments

Instant payments in the European Union will reach a milestone Thursday (Jan. 9).

That’s when banks and payment service providers must be able to receive instant payments.

Through the past several years, PYMNTS Intelligence has tracked the development and momentum of faster payments across the globe. Instant, always-on transactions promise to change commerce, particularly in cross-border settings.

In the June edition of the “Real-Time Payments World Map,” for example, PYMNTS found there were more than 266 billion real-time transactions recorded worldwide in 2023. That number is slated to hit 575 billion transactions by 2028.

Various approaches are in the works. A market-driven approach is the hallmark of the United States, with banks and providers signing onto The Clearing House’s RTP® network or the Federal Reserve’s FedNow® Service.

In the EU, however, a top-down approach with mandated frameworks and protocols has been the hallmark. To that end, the European Commission’s Instant Payments Regulation will mark two deadlines.

Not only will banks and PSPs be required to receive real-time payments Thursday, but they’ll also have to be able to send real-time payments by Oct. 9. Bank transfers must be completed within 10 seconds, no matter whether the money is being sent or received.

In addition, the regulation mandates that charges levied on instant payments cannot be higher than the fees tied to Single Euro Payments Area (SEPA) transactions.

In reference to the transparency of those payments, the European Parliament said in a press release last year: “The payer should be also informed within 10 seconds of whether or not the funds transferred have been made available to the intended recipient. Member states whose currency is not the euro will also have to apply the rules, where the accounts already offer regular transactions in euro, after a longer transition period.”

The “January deadline is a vital milestone, not the finish line,” Jonathan Arler, general manager of the Netherlands at payment platform payabl, told PYMNTS.

The regulation also will help ensure that the EU will “catch up” with other regions and countries that have seen relatively higher rates of adoption for instant payments, he said.

Fraud Checks and Compliance

Banks and PSPs must embrace IBAN checks to prevent fraud and errors.

“As an additional safeguard against fraud, PSPs should allow their clients to set a maximum amount for instant credit transfers in euro, which could be easily modified prior to the next transfer,” the European Parliament said in the release.

If PSPs don’t undertake fraud prevention protocols, and there’s a financial impact, customers can demand compensation.

“PSPs offering instant credit transfers should also verify whether any of their clients are subject to sanctions or other restrictive measures related to money laundering and terrorist financing,” parliament said in the release.

Compliance remains a challenge in terms of technology and handling the demands of instant payments. The European Payments Council estimated near the end of last year that 77% of PSPs had joined the instant transfer scheme. Separately, various reports have noted the unevenness of banks’ readiness to meet the technical and operational demands of instant payments. IBIS Intelligence pegged the “readiness” at 1 in 3 banks.

The PYMNTS Intelligence report “Overcoming Obstacles to Widespread Real-Time Payments Adoption” found that although 90% of banks said their customers (retail and corporate) would benefit from instant payments, 34% of banks said they believe their core systems, some dating back to the 1970s, cannot manage the speed and volume required by real-time payments. Another 34% expressed concern about their systems’ ability to support 24/7 availability, with downtime potentially leading to customer dissatisfaction.

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