Show me the money! Europe’s Instant Payments Proposal

On 26 October 2022, the European Commission adopted a legislative proposal to provide for instant payments in euro across the EU.

The Commission’s proposal is intended to make instant payments universal, affordable and secure. In particular, “instant” is intended to mean “a payment that is sent and received in less than ten seconds – 24 hours a day, 7 days a week, 365 days a year”.1 The introduction of an instant payments framework is intended to contribute to the release of money into the EU economy. The Commission estimates that approximately €200 billion is currently locked in transit in the financial system on any given day.2

The Commission’s proposals are contained in a draft regulation amending the Single Euro Payments Area (“SEPA”) Regulation and the Cross-Border Payments Regulation as regards instant credit transfers in euro (here). The Commission has also published Q&As on the proposal (here) and a factsheet (here).

The Draft Regulation

The Commission’s draft regulation consists of four key requirements (set out in further detail below) and contains phased implementation deadlines for euro and non-euro area member states.

  • Mandatory Provision of Instant Payments in Euro

    All EU payment service providers (“PSPs”) that provide the service of credit transfers in euro to their clients will be required to provide instant payments in euro. The obligation to provide the service of instant payments in euro will apply to PSPs that operate both inside and outside the euro area, as long as they already offer credit transfers in euro.

    The Commission states that payment institutions and electronic money institutions will not be required to provide for instant payments in euro, however those institutions will not be prevented from offering instant payments to their clients on a voluntary basis.
  • Charges for Instant Payments

    The Commission’s proposals aim to make instant euro payments affordable. Therefore, the draft regulation imposes an obligation on PSPs to ensure that the charges for instant payments do not exceed the price charged for non-instant payments.
  • Verification Process

    The Commission aims to increase trust in instant payments by obliging PSPs to verify that the payee’s IBAN matches the name of the payee before the payment is made. Under the draft regulation, PSPs must notify the payer of any discrepancies and the payer has the discretion to authorise an instant payment notwithstanding the discrepancy. PSPs will need to ensure that payers can opt out of this verification service and also subsequently opt in.
  • Screening Instant Payments for EU Sanctions

    The draft regulation aims to preserving the effectiveness of financial sanctions screening for listed persons and entities. PSPs executing instant payments will be obliged to verify whether any of their customers are listed persons or entities (i) at least once a day and (ii) immediately after new or amended restrictive measures enter into force. The draft regulation confirms that the payer’s PSP and the payee’s PSP shall not be required to verify whether the payer or the payee are listed persons or entities during the execution of an instant payment.

Comment and Next Steps

The Commission’s proposal is intended to help Europe become a leading payments market and boost competiveness. Given the uncertain economic environment, the Commission emphasises that this proposal will make a “tangible difference to everyday life for businesses, especially SMEs, who will get more control over their cashflow”.3 There is no doubt that a demand for instant payments exists, however it will be imperative that the proposed framework is workable for PSPs. As such PSPs should take note that the public consultation on the Commission’s proposal is open here. The public consultation will close 8 weeks after the date the draft regulation is available in all EU languages.4 The Commission states that all feedback received will be summarised by the European Commission and presented to the European Parliament and Council with the aim of feeding into the legislative debate. Typically the legislative process can take approximately 18 months and the draft regulation is likely to be subject to further amendment.

Once enacted, the draft regulation will apply on a phased implementation basis.  For example, the obligation to offer the service of receiving instant payments will apply six months after the entry into force of the legislation, followed by the obligation to offer the service of sending instant payments which will apply 12 months after the entry into force of the legislation for PSPs located in euro area member states. PSPs located in member states whose currency is not the euro will be given more time to implement the proposed obligations; it is proposed that all the respective obligations for such PSPs will apply 24 months later than the dates that are applicable to PSPs located in euro area member states.

Also contributed by Jonathan Murchan

  1. Commissioner McGuinness at the Central Bank of Ireland Financial System Conference (here)
  3. Commissioner McGuinness at the Central Bank of Ireland Financial System Conference (here)
  4. The draft regulation was not available in all EU languages as of the date of publication of this briefing.

This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.