This week marks a significant milestone for the financial sector in Europe as the implementation deadline for the EU’s Instant Payments Regulation approaches. Starting from October 9, banks and payment service providers (PSPs) throughout the European Union must be equipped to process and send instant euro payments at any time and for nearly any sum.
The transformation journey began over ten years ago with the introduction of the SEPA Instant Credit Transfer scheme, which allowed euro transfers to be completed in just ten seconds but imposed a limit of €100,000. While this platform demonstrated the feasibility of instant payments, the restriction on the payment amount hindered companies, particularly in managing payroll, tax obligations, and supplier payments.
Under the new regulation, that limitation has been lifted, allowing banks and PSPs to process real-time euro transfers with a staggering maximum limit of €999,999,999.99. The intent of the European Parliament and Council is clear: they aim for instant payments to become a standard practice across the entire European bloc rather than an occasional service.
The rollout of the regulation has occurred in two phases. The initial phase commenced on January 9, 2025, mandating that all EU and EEA PSPs must accept instant payments. This week, the second phase requires that they must also initiate them.
Achieving compliance goes beyond merely increasing speed. The regulation mandates that pricing for instant transfers must be equivalent to that of traditional transactions, along with robust fraud prevention measures and the establishment of Verification of Payee systems. This feature serves as a safeguard against authorized push payment fraud by notifying users if there’s a discrepancy between the recipient’s name and their account details.
However, professionals in the industry express concern over the tight timeframe for compliance. The European Payments Council only released its list of Verification of Payee partners in May, leading many vendors to rush in their efforts to test and integrate the necessary technology.
One critical implication of lifting the €100,000 cap is the heightened necessity for effective liquidity management. Banks now face the challenge of maintaining a continuous flow of available funds, even during late-night transactions and weekends.
According to the governing body, the evolution towards instant payments has removed the window previously available for banks to examine transactions. Fraud detection teams now have a mere five seconds to confirm payee information before a transaction is finalized. In addition, PSPs are mandated to perform daily checks against sanctions lists to confirm that none of their clients are included on such lists, balancing the need for security with the requirement for expedited transfers.
A notable institution already aligning with the new directives is the Bank of Cyprus, which has announced its capacity to provide instant euro transfers. This capability will enable customers to send and receive funds across Europe in a matter of seconds, day or night.
To comply with the regulatory framework, banks have been compelled to revamp their internal systems to align with updated technical and security specifications. These enhancements encompass more effective fraud detection mechanisms, real-time error identification processes, and verification tools to ensure customer security.
As Europe’s financial infrastructure adjusts to these new requirements, the sector is under considerable pressure to deliver a seamless transition. This initiative signals a significant step towards the establishment of a more responsive and integrated payment ecosystem across the continent, with both opportunities and challenges lying ahead for the institutions involved.