With the second part of the EU Instant Payments deadline due this week, Laurent Descout, CEO and co-founder at Neo, takes a closer look at the legislation and explores its implications for banks and PSPs.
After years of development, the EU Instant Payments Regulation is now entering the final phase of its implementation.
SEPA Instant Credit Transfer, a payment system that enables instant payments across the Single European Payments Area (SEPA), was first launched in 2014, allowing payments to be made in ten seconds. However, the limit on these payments was set at €100,000 – a cap considered far too low for most corporates dealing with the modern treasury needs of high-value payments such as payroll, taxes or supplier payments.
As a result, firms had to split larger payments into multiple smaller ones to stay within the limit. This slowed uptake, with only 56% of Europe’s more than 5,500 payment service providers (PSPs) registered for SCT-Inst.”
To remedy this and accelerate the adoption of instant payments, the European Council and European Parliament struck a deal to expand on SEPA Instant Credit Transfer, rolling out the EU Instant Payments Regulation in March 2024.
The new regulations make instant payments in euros mandatory for banks and PSPs within the Eurozone. As such, firms must now offer 24/7 instant payments across all channels, without surcharge. To support higher-value transactions and open up new use cases for businesses, the cap has been raised to a theoretical €999,999,999.99, removing the previous €100,000 ceiling.
These regulations will allow for a new frontier of faster and more seamless corporate treasury and will power the charge towards instant payments as standard. Recent research has predicted that global instant payments are on track to surpass $100 trillion by 2029, with regulatory changes in Europe playing a key role in this growth.
However, for all the benefits that the EU Instant Payments regulations will usher in, the process of ensuring compliance has brought operational hurdles for banks and PSPs.
The rollout of the EU Instant Payments Regulation has been split into two parts. The first deadline, which came into force on January 9, 2025, required all banks and Payment Service Providers (PSPs) operating within the EU and EEA countries to be capable of receiving instant payments. While many already had functionalities to allow this, the regulations made it a legal obligation.
The second deadline, set for October 9, 2025, requires PSPs and banks to be able to send instant payments while also complying with additional obligations, including enhanced fraud controls, pricing parity with standard credit transfers, and the provision of Verification of Payee (VoP) services.
To cope with these deadlines, many banks and PSPs have been under strain to update outdated and clunky legacy systems to those that can facilitate instant payments. Meanwhile, corporates have looked toward integrated treasury management solutions to ensure a smooth transition.
While instant payments will offer a new frontier of efficiency for all businesses and consumers, implementation is by no means frictionless. The EU Instant Payments Regulations are causing huge strain for banks and businesses, which are racing to be able to send instant payments by October.
One of the most challenging aspects of instant payments is 24/7 payment processing. Under the new rules, users must be able to send money at any time. Banks and PSPs must therefore ensure their systems operate reliably around the clock, and that customer service is also available during evenings and weekends.
Banks and PSPs need to prepare for the liquidity risks that will come with large payment volumes outside of business hours. With the €100,000 cap now a thing of the past, millions can now be theoretically transferred in the middle of the night. To cope with this, they will need to bolster their liquidity buffers to ensure that accounts won’t run dry.
Detecting fraud in instant payments also poses a challenge. Where firms once had hours to screen payments to ascertain legitimacy or even reverse them, they now only have a matter of seconds. To combat Authorized Push Payment (APP) fraud, the regulation mandates that the Verification of Payee service response, which alerts senders if the recipient’s name and account number don’t match and asks if they would like to proceed with the payment, must now be issued within five seconds.
Exploring how PSPs will cope with the demand of detecting fraud within seconds, Annick Moes, Head of Industry Issues, Cooperation Initiatives and Communication at the EBA, recently warned of the prospect of a potential “nightmare before Halloween,” as vendors scramble to integrate VoP end-to-end in their services, and iron out issues of false alarms.
Adding pressure to the situation, the European Payments Council has only recently released its directory of Verification of Payee service partners in May, leaving vendors scrambling to select a partner and ensure their products work smoothly.
The benefits of the EU Instant Payments Regulation will be significant, particularly for the B2B sector. Connecting disparate systems across Europe will make money transfers cheaper, faster, and more transparent. For businesses, instant low-cost payments allow better liquidity management and faster access to working capital.
Yet, technical challenges remain, and the pressure is mounting for banks and PSPs to meet the October deadline.
However, with the right partners, businesses of all sizes can harness new technologies to streamline their treasury operations and unlock the full potential of instant payments.