How Instant Payments Are (Finally) Becoming Europe’s New Normal
It has long been the ambition of the EU to instil a culture of instant payments throughout the trading bloc, and now that stands a chance of becoming the reality, thanks to the historic Instant Payments Regulation (IPR).
In this video, Paylume’s founding partner Kjeld Herreman talks us through why the new regulation is going to be monumental for Europe and what lies ahead for banks and payment firms.
What does the IPR mean for instant payments?
The key objective of this legislation is to encourage the use of SEPA Instant Payments within the EU, and the framework means that for banks offering payment services and, in the Eurozone, they must now offer the sending and receiving of instant payments at an equal charge to standard payments.
Meanwhile, providers are required to introduce IBAN-name verification, known as Verification of Payee, to reduce fraud and misdirected payments.
Sanctions compliance has also been overhauled, owing to the change in screening.
Under the IPR, payment service providers should no longer perform sanctions screening on a per-transaction basis for instant credit transfers. Instead, they are required to screen entire their customer base at least once a day and immediately upon the introduction or amendment of any EU sanctions, something which has become a constant in recent years due to geopolitical problems.
While the rules are obligatory for firms in the Eurozone, firms that are outside of this, operating in countries such as Poland or the Nordics, as well as payment and e-money institutions, will need to comply with this instead in 2027.
Could this revolutionise EU payments?
This regulation removes the main barriers to instant account-to-account payments across the EU.
There are some countries where there is already wide take up, for example, with Spain’s Bizum and Poland’s Blik, both of which have widespread use and have become popular payment methods.
However, the IPR closes the coverage gaps and should encourage more uptake in slower adopters like Italy, Germany and Ireland.
Much more than PSD2, these changes position A2A payments as a credible, everyday alternative to the international card schemes. This legal framework could deliver the European Commission’s wish of bringing more sovereignty to the payments ecosystem.
The immense pressure that banks have been put under by the European Commission and others to make payments European again could find itself being realised through the IPR. For mobile wallets like the European Payment Initiative’s Wero, the regulation is vital.
Adoption, engagement and eventual critical mass is reliant on ubiquity and affordability, and the IPR lays the foundation for that
