EU adopts instant payment regulation
The European Council recently enacted a regulation aimed at fully integrating instant payments in euros for both consumers and businesses across the European Union and the European Economic Area. This groundbreaking move is set to bolster the strategic autonomy of the European economic and financial sectors by mitigating the over-reliance on financial institutions and infrastructures outside the EU. By facilitating the immediate mobilization of cash flows, the regulation promises significant benefits for citizens and companies alike, paving the way for innovative services that add value.
Under the new regulation, payment service providers, including banks that offer standard credit transfers in euros, are now mandated to provide the capability for sending and receiving instant payments in euros. Importantly, any fees associated with these instant payments cannot exceed those charged for standard credit transfers. This initiative is not only aimed at streamlining financial transactions within member states but also extends to cross-border payments within the EU, acknowledging the unique needs of non-euro area entities.
The regulation introduces a transitional period, with a quicker implementation timeline for euro area countries, while non-euro area countries are afforded more time to adapt. Additionally, the regulation amends the Settlement Finality Directive (SFD), granting payment and e-money institutions (PIEMIs) access to payment systems. This inclusion comes with stringent safeguards to ensure that the system’s integrity remains uncompromised. Furthermore, instant payment providers are now required to verify the match between the beneficiary’s IBAN and name, enhancing security measures against potential errors or fraudulent activities.
This regulatory development is part of the broader capital markets union initiative, which seeks to create a seamless market for capital across the EU. By modernizing the single euro payments area (SEPA) regulation of 2012 with provisions specific to instant credit transfers in euros, this regulation represents a significant step towards achieving a unified and efficient financial ecosystem within the EU. It underscores the EU’s commitment to fostering an environment that encourages investment, supports businesses, and protects consumers.
