Banking & Finance

New Regulation on Instant Payments Adopted

29 Feb 2024

3 min read

Author: Jessica Camilleri

The Council of the European Union has, on the 26th of February of this year,  adopted a regulation aimed at promoting instant payments within the European Union (EU), in accordance with the Union’s initiative to foster a capital markets union. The Instant Payments Regulation will allow individuals to transfer funds to another EU member state as well as within the same country in just 10 seconds, at any time of day.

This legislation lays out guidelines and requirements to promote the broad implementation and interoperability of instant payment systems throughout the European Union, allowing individuals and businesses to transmit and receive funds instantly, around-the-clock, all year round. This regulation aims to improve the efficiency, convenience, and security of financial transactions within the European Union by standardizing regulations and creating a framework for quick payments. This will promote competition and innovation in the payment services sector, while simultaneously highlighting the significance of ensuring data security and consumer safety within instant payment systems in order to preserve public confidence in the financial industry. 

Through shorter transaction times as well as increased financial liquidity, this effort seeks to boost the efficiency and velocity of financial transactions throughout the Eurozone, which will benefit both individuals and businesses. It will be mandatory for payment service providers to provide the ability to initiate and receive instant payments in euros, in addition to  the presently offered standard credit transfers in euros. It is to be ascertained by all payment service providers that applicable charges must not be higher than those linked with regular credit transfers.

By amending the Settlement Finality Directive (SFD), this new piece of  legislation allows payment and e-money institutions (PIEMIs) to obtain access to payment systems. Following the transitional period, these firms will be compelled to provide the service of transferring and receiving quick credit transfers. As it currently stands, the regulation incorporates the necessary protections to guarantee that PIEMIs’ access to payment systems do not expose the system to further risk.

The new regulations also require instant payment providers to confirm that the beneficiary’s name and IBAN match prior to executing a transaction. This is done so as to ensure that the payer can prevent any erroneous or fraudulent payments. This is also applicable to regular transfers. 

Finally, this regulation contains a review clause which sets out an obligation on the Commission to complete a report displaying an evaluation of the development of credit charges over time. 

This recent adoption by the EU marks a positive stride towards aligning payment systems with contemporary demands. The EU’s dedication to embracing innovation within the financial landscape also symbolizes a pivotal moment in the evolution of modern payments, as this regulatory framework embodies a crucial balance of digital progress and financial integrity and safety.