Making instant euro payments an affordable reality for EU citizens and businesses holding a bank account within the EU or EEA is the objective of a recent proposal made by the European Commission.
Instant payments allow people to transfer money at any time of any day within a couple of seconds as opposed to the three-day time lag usually experienced in the case of normal SEPA credit transfers. Such payments are obviously both more convenient and efficient for citizens and industry alike when it comes to the management of finances in daily life.
By way of example, businesses can immediately receive what they are owed when they sell goods and services whilst they can also offer a better service to their customers by offering instant refunds, where necessary.
Instant payments facilitate e-commerce since online traders can immediately and safely release the goods once payment is effected instantly. Banks can also use instant payments to leverage into developing innovative financial services and products.
Currently, the availability of instant payments and related fees vary strongly across member states. This makes legislative intervention at an EU level indispensable to achieve harmonisation and a level playing field for EU citizens and businesses alike.
Increasing trust in affordability and availability of instant payments is the name of the game in so far as this proposed legislative measure is concerned. The proposed regulation, which will amend the current regulation on SEPA payments, obliges all payment services providers, with certain limited exceptions, which offer credit transfers in euro to also offer instant payments in euro to their customers. It will be left to the discretion of each individual provider to decide whether to offer only instant payments or both instant and non-instant ones. The service of euro instant payments will apply to payment service providers that operate both inside and outside the euro area, provided that they already offer credit transfers in euro.
At the beginning of 2022, only 11 per cent of all euro credit transfers in the EU were instant
The proposed regulation seeks to ensure that the cost of instant payments in euro is equal to or lower than the charges for non-instant euro credit transfers, thereby eliminating the huge discrepancy in cost which currently subsists between instant transfers and traditional SEPA transfers.
Consumers and businesses utilising SEPA credit transfer services sometimes incur losses due to the provision of inaccurate information about the beneficiary to their service providers. In terms of the current legislative payments’ framework, providers of payment services are not liable for losses incurred by the payer if a payment transaction is executed using the beneficiary’s IBAN as supplied by the payer.
To circumvent such issues, all service providers offering euro instant services will, in terms of the proposed regulation, be obliged to offer the service of verifying whether the beneficiary’s name and IBAN match, and warn the payer of any discrepancies. The proposal does not prohibit the payment service provider from charging a fee for such service. The user will enjoy the discretion to decide whether to use this service or otherwise.
The instantaneity of payments will not impinge on the service provider’s obligation to comply with anti-money laundering legislation and to perform required due diligence. Specifically in relation to sanction screening, whereas in the case of normal transfers sanction screening of clients is carried out on a transaction-by-transaction basis, in the case of instant payments, providers will be obliged to follow a harmonised procedure for sanctions screening, based on daily checks of their own clients against EU sanctions lists.
The proposal contains different implementation deadlines depending on the aspect being regulated and on whether the service provider is located in a euro area or non-euro area.
With the technology to provide for instant payments now having been around for a number of years, it comes as a surprise that at the beginning of 2022, only 11 per cent of all euro credit transfers in the EU were instant. The proposed regulation will, therefore, possibly have the desired effect of eradicating all barriers to the provision and use of instant payments and align the payments regulatory framework with our fast-paced world where literally every second counts.