European Council Adopts Regulation on Instant Payments in Eurozone

Making instant payments easier in the Eurozone, the European Council (EC) has adopted a regulation that will make such payments fully available in euro to consumers and businesses in the EU and in EEA countries.

The law is likely to come into force by April, and banks in the Eurozone single currency area must allow instant payments within 18 months of that date. The 27 member states of the EU approved the law on Monday, after the European Parliament okayed the proposal.

The new rules will improve the strategic autonomy of the European economic and financial sector as they will help reduce any excessive reliance on third-country financial institutions and infrastructures. Improving the possibilities to mobilise cash-flows will bring benefits for citizens and companies and allow for innovative added value services.

The instant payments regulation will allow people to transfer money within ten seconds at any time of the day, including outside business hours, not only within the same country but also to another EU member state. The regulation takes into consideration particularities of non-euro area entities.

Payment service providers such as banks, which provide standard credit transfers in euro, will be required to offer the service of sending and receiving instant payments in euro. The charges that apply (if any) must not be higher than the charges that apply for standard credit transfers.

The regulation grants access for payment and e-money institutions (PIEMIs) to payment systems, by changing the settlement finality Directive (SFD). As a result, these entities will be covered by the obligation to offer the service of sending and receiving instant credit transfers, after a transitional period. The regulation includes appropriate safeguards to ensure that the access of PIEMIs to payment systems doesn’t carry additional risk to the system.

Under the new rules, instant payment providers will need to verify that the beneficiary’s IBAN and name match in order to alert the payer to possible mistakes or fraud before a transaction is made. This requirement will apply to regular transfers too.

The regulation includes a review clause with a requirement for the Commission to present a report containing an evaluation of the development of credit charges.

Background

This initiative comes in the context of the completion of the Capital Markets Union. CMU is the EU’s initiative to create a truly single market for capital across the EU. It aims to get investment and savings flowing across all member states for the benefit of citizens, businesses, and investors.

On 26 October 2022, the Commission put forward a proposal on instant payments that amends and modernises the single euro payments area (SEPA) regulation of 2012 on standard credit transfers in euro by adding to it specific provisions for instant credit transfers in euro.