• Anthony Walton, CEO at Iliad Solutions


• 24.05.2024 01:15 pm
#InstantPayments #EuropeanRegulation

Last month, the European Union (EU) adopted a new regulation that requires all banks and payment service providers to offer customers the ability to send and receive instant payments at any time of the day.

This is great news for businesses and consumers, who will benefit from near real time settlement of transferred funds. However, for financial institutions pressure is now on to comply with the rules inside a nine-month window that opened on April 8, 2024.

For the policy nerds among us, we’re talking about amendments to the Single Euro Payments Area Regulation, the Cross-Border Payments Regulation, the Settlement Finality Directive and the Second Payment Services Directive under Regulation (EU) 2024/886 of the European Parliament and Council, March 13 2024. 

The goal of the regulation is to strengthen Europe’s financial sovereignty by reducing dependence on financial institutions in third countries. It’s hoped that Euro Instant Payments will end the EU’s reliance on external payment systems and promote financial stability and autonomy.

Yet commentators have described the changes as unprecedented from an implementation perspective and say they represent a massive challenge for the sector. Speed is now of the essence.

However, it’s essential that businesses and entrepreneurs understand and adapt to the regulation, which is set to make instant payments the new norm. By complying, payment providers will deliver transaction security and build trust with customers. Those who don’t adhere can expect strict penalties.  

So what will the new rules mean in practice?

As far as end users are concerned, the instant payments regulation enables people to transfer funds between accounts within 10 seconds, 24 hours a day both inside and between any EU member state.

Banks and other payment service providers in Europe are required to facilitate the sending and receiving of instant payments in euros, however any charges must not exceed those applied to standard credit transfers. 

Crucially, financial institutions within the euro area have just nine months to comply, although those outside are being given longer. 

Payment and e-money institutions, such as fintechs and challenger banks, have been granted access to statutory payment systems under the new regulation but with that comes an obligation to offer instant credit transfers. 

Fraud prevention measures will compel payment service providers to verify beneficiary IBANs and names, and alert payers to mistakes or scams as part of the transaction process.

How can financial institutions implement EU instant payments?

Many payment service providers will already be used to facilitating instant payments via third parties such as Visa and Mastercard. So, while the rules undoubtedly add pressure to development teams within financial institutions, the regulation in no way represents a culture shock. 

That said, in 2023 instant payments still only accounted for seven percent of electronic payments and just 15 percent of euro credit transfers were in real time in Europe.

Nonetheless, tried and tested tools are already available to support the implementation of Regulation (EU) 2024/886. 

In fact, this is an area of specialism for Iliad Solutions. Our t3 platform has supported the adoption of real-time payments by major banks in the United States and beyond for many years. We also played a key role in the implementation of Faster Payments in the UK.

As a result of this experience, Iliad is acutely aware of the importance of testing interoperability between internal and external payment systems. 

And this is something financial institutions rushing to comply will need to consider over the coming weeks and months. It’s vital that systems are rigorously tested prior to launching to avoid any delays that might result in compliance breaches. 

Independent and free of any conflicts of interest, t3 can provide sandboxes, functional and non-functional testing, pre-certification, on-boarding and much more. It also runs in the cloud or on-prem.