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EU agrees game-changing deal for instant payments

EU agrees game-changing deal for instant payments

The European Council and European Parliament have struck a provisional agreement on the mandatory provision of instant credit transfers in euros and access to central bank payment rails by non-bank e-money institutions and stablecoin issuers.

Under the planned 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 at no extra charge.

As part of the agreement, non-bank payment institutions, such as e-money institutions and future regulated stablecoin issuers will be granted direct access to central bank payment systems.

Mep Michieel Hoogeveen says: "The EU payments systems as a whole will become more competitive. The Parliament negotiating team also secured that, under certain conditions, fintech companies will be granted direct access to the European Central Bank’s payment infrastructure, so they won't have to pay banks anymore to do it for them”

In a statement, the Council and Parliament say that the rules will improve the strategic autonomy of the European economic and financial sector as they will help reduce any excessive reliance on third-country financial institutions and infrastructures.

Not only will the move make instant euro payments universally available and affordable, it will also increase trust thanks to an obligation on providers to verify the match between the IBAN and the name of the beneficiary provided by the payer, says the Council.

The rules will come into forces in two stages, with a shorter transition period in the euro area and a longer one in EEA countries.

Kjeld Herreman, head of strategy advisory at RedCompass Labs, says: "Although this legislation is good news for European consumers and businesses, the technical implementation is set to be an enormous challenge for banks. It will require them to rapidly assess their digital capabilities and to work together with their counterparts and service providers to address these challenges in a short period of time.

"Timelines for this move are extremely ambitious, as banks will also need to enable file-based instant payments without surcharge for their business clients. The result of this is that even payment service providers that are already capable of processing instant payments will massively need to scale their throughput."

Comments: (4)

Martin Sansone
Martin Sansone - Pay.UK - London 10 November, 2023, 10:21Be the first to give this comment the thumbs up 0 likes

Can anybody add colour to the meaning behind the words "Council and Parliament say that the rules will improve the strategic autonomy of the European economic and financial sector as they will help reduce any excessive reliance on third-country financial institutions and infrastructures."
I assume the proposal document ref "COM(2022)546 final" is at EUR-Lex here: 

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52022PC0546R(01)&qid=1699610741402

A Finextra member
A Finextra member 10 November, 2023, 10:461 like 1 like

The "colour" is that the American and Chinese based payment services should be pushed to much smaller roles in the future EU payments landscape and the EU payments market will be operated by EU providers. I.e. both debit card payments, mobile payments and credit transfer services will be in EU hands regarding ownership control and governance. The final spike to this will be the digital Euro in the EU authorities view...

Kjeld Herreman
Kjeld Herreman - RedCompass Labs - Brussels 10 November, 2023, 11:372 likes 2 likes

Martin, If we consider European retail payments, they are extremely dependent on (primarily US) payments giants, ie Visa & Mastercard. With the emergence of instant payments, new "payment vs delivery" use cases are unlocked, especially when combined with overlay services such as open banking, request to pay, or EPI. Having merchants accept payment methods that rely on these instant payment rails rather than card rails, which are potentially subject to US policy and interests, provides a viable anternative for European payment service users. This, in turn, increases European sovreignty in the eyes of the regulators.

A Finextra member
A Finextra member 16 November, 2023, 06:39Be the first to give this comment the thumbs up 0 likes

Why would anybody build these a2a real time  payment services sice the EU regulation proposals restrict the ability of the payment service providers to make a profit from them? Major investments are needed to take present day bank-to bank instant credit transfer service for use in merchant outlets and e-commerce. The entire front end and also most of back end is missing from the instant payments scheme that only specifies how a real time payment is transfereed from payer bank to payee bank. It is unlikely that investments are going to be made especially as the European Central Bank and the EU Commission are proposing mandatory acceptance of the digital Euro for all merchants and e-commerce outfits. The digital Euro will provide the same services as any a2a real time payment at point of sale and why would anybody build a2a instant at POS when the ECB and EU work for the mandatory digital Euro. Sometimes the better becomes the worst enemy of the good. 

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