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Instant payments in euro

In “An Economy that Works for People”

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Instant payments are 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. In the EU, the architecture for instant payments in euro already exists, but they suffer of  slow rollout and low uptake. At the end of 2021, only 11% of euro credit transfers sent in the EU were instant payments. Legislative intervention is therefore needed to develop euro instant payments across the EU and unlock their benefits for EU citizens and businesses, in particular SMEs.

On 26 October 2022, the European Commission has put forward a legislative proposal on instant credit transfers in euro (also known as "instant payments"). The proposal aimed to ensure that instant payments in euro are affordable, secure, and processed without hindrance across the EU. Instant payments allow people to transfer money at any time of any day within ten seconds. The proposal, which amends and modernises the 2012 Regulation on the Single Euro Payments Regulation (SEPA), consists of four requirements regarding euro instant payments:

  1. 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.
  2. 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.
  3. 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.
  4. 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.

In the European Parliament, on 21 November 2022, the Committee for Economic and Financial Affairs (ECON) has been referred in plenary as responsible for the file. On 5 December 2022, the ECON Committee has appointed Mr Michiel Hoogeveen (ECR, Netherlands) as rapporteur. On 2 March 2023, the ECON rapporteur has published his draft report. On 28 June 2023,  the ECON committee adopted its report and decision to open interinstitutional negotiations. On  10 July 2023, Committee decision to enter into interinstitutional negotiations announced in plenary (Rule 71). The decision was confirmed in plenary (Rule 71) on 12 July 2023.

The negotiating position of the Parliament stated that payment service providers should not increase, directly or indirectly, their charges for instant credit transfers in respect of sending and receiving other, corresponding, credit transfer transactions in euro. EBA should submit a report by four years after the date of entry into force of this amending Regulation, on the impact of the application on the pricing of credit transfers and instant credit transfers. The Parliament proposed that payer’s payment service providers will verify, free of charge, whether the payment account identifier and the name of the payee provided by the payer match. Payment service providers offering instant credit transfers should verify whether any of their payment services users are listed persons or entities. 

On 22 May 2023, the Council adopted its general approach. The Council specified that the implementation of the new rules will happen faster in member states which are within the euro area. For payment service providers located in member states outside the euro area, there will be a phased implementation time. The Council included a review clause with a requirement for the Commission to present a report which shall contain an evaluation of the development of these charges over time.

After trilogues negotiations, The Council and the European Parliament have reached a political agreement on the text. Under the provisionally agreed rules, payment service providers such as banks, which provide standard credit transfers in euro, will also be required to offer the service of sending and receiving instant payments in euro. The charges that apply (if any) must no be higher than the chares that apply for standard credit transfers. The Council and Parliament agreed that the new rules will come into force after a transition period that will be faster in the euro area and longer in the non-euro area, who need more time to adjust. The colegislators agreed to grant access for payment and e-money institutions (PIEMIs) to payment systems, by changing the settlement finality Directive (SFD). As a result, these entities will be covered by the obligation to offer the service of sending and receiving instant credit transfers, after a transitional period. The colegislators added appropriate safeguards to ensure that the access of PIEMIs to payment systems doesn’t carry additional risk to the system. Under the new rules, instant payment providers will need to verify that the beneficiary’s IBAN and name match in order to alert the payer to possible mistakes or fraud before a transaction is made. This requirement will apply to regular transfers too. The Council and Parliament included a review clause with a requirement for the Commission to present a report containing an evaluation of the development of credit charges.

On 11 December 2023, the ECON Committee approved the text agreed at first reading in the interinstitutional negotiations. On 7 February 2024, the Parliament in plenary decided to adopt the agreed text, in first reading. On 26 February, the act was adopted by the Council. The final act was signed on 13 March, and published on the Official Journal on 19 March 2024.

References:

Author:  Stefano Spinaci, legislative-train@europarl.europa.eu

As of 15/12/2024.