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SpanishEnhancing payments in the European Union: the impact of the instant payments regulation
On 19 March 2024, Regulation (EU) 2024/886 as regards instant credit transfers in euro (the “Instant Payments Regulation”) has been published in the Official Journal of the European Union. The Instant Payments Regulation entered into force on 8 April 2024, and its requirements, as described below, will generally be applicable in January 2025 to payment service providers in relation to the receipt of instant credit transfers in euros, and in October 2025, to payment services providers with respect to sending instant transfers in euros.
The Instant Payments Regulation amends, amongst others, Regulation (EU) No 260/2012, which established the groundwork for the Single Euro Payments Area (SEPA). SEPA has been pivotal in streamlining euro-denominated payments across the European Union because it has promoted uniform standards while fostering competition across the payments sector of the Union. To continue adapting to market innovations, the European Parliament and the Council have adopted the Instant Payments Regulation in order to enhance SEPA with updated measures that are directed to boost the uptake and efficiency of instant credit transfers in the European Union.
In order to do so, the main feature of the Instant Payments Regulation is to grant consumers and businesses across Union and EEA countries full access to instant euro payments. The aim is therefore to provide European payees and payors with an enhanced framework for fast credit transfers, while bolstering the strategic independence at the level of the European economic and financial sector by reducing reliance on third-country financial institutions and infrastructures (such as card schemes), which could potentially endanger the stability and sovereignty of Europe’s financial system.
By diminishing the abovementioned dependency and reinforcing its financial autonomy, the Instant Payments Regulation also fosters competition and innovation in the European payment services sector. In addition, the Instant Payment Regulation promotes the importance of data security and consumer protection within instant payment systems to maintain public trust in the financial industry.
One of the principal regulatory changes that the Instant Payment Regulation has established is that payment service providers will need to provide payors and payees with the possibility to initiate and receive “instant credit transfers” in euros (in addition to the currently offered standard credit transfers). An “instant credit transfer” is defined as “a credit transfer which is executed immediately [i.e. in less than 10 seconds], 24 hours a day and on any calendar day” (Article 1(1)(a) of the Instant Payments Regulation).
The Instant Payments Regulation thus enables clients to transfer funds in euro both domestically and to other EU member states in just 10 seconds, around the clock.
The Instant Payments Regulation is however not limited to the laying down of the abovementioned faster credit transfers, but it also underscores the importance of safeguarding data and protecting payment users within instant payment systems. In this respect, the Instant Payments Regulation establishes that payment service providers should verify whether the payment account identifier of the payee and the name of the payee provided by the payer match. Where they do not match, the payment service provider of the payer shall, based on the information provided by the payee’s payment service provider, notify the payer thereof and inform the payer that authorising the credit transfer might lead to a payment account not held by the payee indicated by the payer. This step helps the payer avoid mistakes or fraudulent payments, and also applies for standard (i.e. non-instant) transfers. In certain circumstances, it will be possible for payment service users that are not consumers to opt out from receiving the abovementioned service.
The above being said, the obligation to perform IBAN/name checks is not straightforward to implement. The Luxembourg Bankers’ Association (ABBL) has noted that compliance with such an obligation constitutes a significant change, particularly in Luxembourg, where a significant number of banks are private and investment banks to which, due to the characteristics of their client base and activities, the instant credit transfers do not form part of their main business.
“The Instant Payments Regulation establishes that payment service providers should verify whether the payment account identifier of the payee and the name of the payee provided by the payer match. Where they do not match, the payment service provider of the payer shall, based on the information provided by the payee’s payment service provider, notify the payer thereof and inform the payer that authorising the credit transfer might lead to a payment account not held by the payee indicated by the payer.”
It is also worth noting that the Instant Payments Regulation allows payment and e-money institutions to participate in payment systems by amending Directive 98/26/EC on settlement finality in payment and securities settlement systems (the Settlement Finality Directive – SFD). The Directive (EU) 2015/2366 on payment services in the internal market (the Payment Services Directive – PSD II) has also been amended to introduce conditions for requesting participation in designated payment systems, which consists of additional appropriate safeguards to ensure that the access be payment institutions and e-money institutions does not carry additional risk to these payment systems. The Instant Payments Regulation therefore incorporates necessary safeguards to ensure that the access by payment and e-money institutions to payment systems does not introduce extra risk to the system.
Finally, to address compliance with EU restrictive measures, the Instant Payments Regulation requires periodic, at least daily, verification of users against restrictive measures lists. This will not constitute any major change as this already aligns with Luxembourg standards.
In conclusion, the Instant Payments Regulation marks a significant advancement in the European Union’s financial landscape by facilitating rapid, secure, and efficient euro transfers across member states. By bolstering the Single Euro Payments Area (SEPA), this regulation enhances both the payment users’ convenience and the EU’s financial autonomy. It promotes competition, and fosters innovation in the payment services sector. Additionally, it emphasizes data security and payment users’ protection to maintain public trust. Despite implementation challenges, particularly with IBAN/name verification, the regulation’s comprehensive safeguards ensure a balanced approach, minimizing risks while maximizing benefits for consumers and businesses alike.
Should you have any questions or require assistance regarding the implementation of the Instant Payments Regulation, please do not hesitate to contact us. We will be happy to help you ensure compliance with all relevant requirements and provide you with a tailored legal advice and support.
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