By Audrius Pranckevicius and Katarzyna Kobylinska-Hilliard

In March 2021, the European Commission launched two consultations to feed into its ongoing work on how to possibly ensure the wide availability and use of instant payments in the EU and deal with the remaining obstacles that are still standing in the way. The consultations follow up on the EU’s Retail Payments Strategy, which aims to bring European citizens and businesses more choice when it comes to safe, fast and reliable payment services. 

What are instant payments?

Instant payments represent a new, faster and more convenient generation of credit transfers. With regular credit transfers, funds are usually only available on the account of the beneficiary on the following business day, and some may take even longer. However, instant credit transfers allow for funds to be credited to the beneficiary's account within seconds – 24 hours a day, every day of the year, including weekends and public holidays. This has clear benefits for consumers, businesses and public authorities. But in addition to this, instant credit transfers – when combined with mobile phone applications, e-invoices, standardised messages requesting payments or similar solutions – could provide the foundations for the development of many other, more convenient payment solutions.

Instant payments today

In order for anyone holding a payment account to be able to send and receive instant credit transfers, all account holding payments service providers (PSPs) must agree to follow a single set of rules, practices and standards for the transfer execution. To this end, in 2017 the European Payments Council launched a voluntary scheme (the ‘SEPA Instant Credit Transfer Scheme’, or ‘SCT Inst. Scheme’) for instant credit transfers in euro. Similar schemes exist in some Member States for instant credit transfers in other EU currencies.

A broad level of participation in the SCT Inst. Scheme is needed to ensure the take-up of euro instant credit transfers in the EU, as it would guarantee that such transfers could be processed between a payer in one EU country and a beneficiary in any other EU country. This is because an instant credit transfer transaction can only happen if a PSP reachable at each end of the transaction is able to send and receive instant credit transfers. However, according to data from March 2021, over 35% of EU PSPs have still not signed up to the SCT Inst. Scheme. Furthermore, not all of the remaining 65% are able to send and receive instant credit transfers cross-border, due to the fact that not all PSPs taking part in the scheme are connected to the relevant clearing and settlement mechanism that allows for instant settlement of cross-border credit transfers. Moreover, the volume of instant credit transfers represented only 7.9% of all credit transfers in euro. This indicates not only that there are many potential benefits that remain untapped, but also that there are a number of obstacles that may be standing in the way of a quicker transition to instant payments-based transactions in the EU. 

These figures conceal the uneven extent of progress across the EU. In some Member States, close to 100% of payment accounts can now be reached by instant credit transfers, and such transfers are increasingly viewed, by the industry and consumers alike, as the ‘new normal’. However, in a number of other national markets, PSPs have either only just begun – or even remain reluctant – to join the instant credit transfer bandwagon. 

Focus on possible enabling measures

In its communication on a “Retail Payments Strategy in the EU” adopted on 24 September 2020, the Commission confirmed its objective of fostering the full take-up of instant payments in the EU. This would also facilitate the emergence of competitive home-grown and pan–European payment solutions, in line with the objectives of the EU's open strategic autonomy. Of the two consultations launched in March, the public consultation is addressed to all stakeholder groups, and runs until 23 June on the Have Your Say portal. The Commission is also conducting a targeted consultation until 2 June, which is aimed at PSPs and providers of supporting technical services, and focuses on matters of a more technical nature. The feedback received through these consultations will feed into the Commission’s forthcoming decisions on possible enabling measures to move ahead with the instant payments agenda. This is your chance to contribute!

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Audrius Pranckevicius and Katarzyna Kobylinska-Hilliard are policy experts at the European Commission