The Regulation (EU) 2024/886 of the European Parliament and of the Council of March 13, 2024, amending Regulations (EU) No. 260/2012 and (EU) 2021/1230 and Directives 98/26/EC and (EU) 2015/2366 as regards instant credit transfers in euro, was published in the Official Journal of the European Union on March 19, 2024.[1] The regulation will enter into force 20 days after its publication in the Official Journal on April 8, 2024 (“Instant Payment Regulation”) and aims to make instant credit transfers in euros fully available to consumers and businesses in the European Union.
Background
According to a statement released by the European Council in May 2023, the project is a component of the completion of the Capital Markets Union, the economic strategy plan introduced in 2014.[2] By including special rules for quick credit transfers, it aims to update and modify the Single Euro Payments Area (SEPA) legislation from 2012 regarding standard credit transfers.[3]
The European Central Bank claims that the legislation is also a major objective of the Eurosystem’s retail payments strategy, which will help customers and businesses by enabling payments for goods in-person, online, and at physical stores.[4]
In order to boost their adoption and accessibility for customers and enterprises inside the EU and European Economic Area nations, the Council consequently proposed the legislation on quick credit transfers in euros.[5]
Reducing excessive reliance on external financial infrastructures and institutions is one of the goals of the law, which also seeks to strengthen the economic and financial sector’s strategic independence within the EU. This will therefore make it easier to mobilise capital flows, which will benefit enterprises and consumers alike and allow for the creation of cutting-edge value-added services.
Enhancing payment efficiency
The Regulation, which amends Regulations (EU) No. 260/2012 and (EU) 2021/1230, as well as Directives 98/26/EC and (EU) 2015/2366 with regard to instant credit transfers in euros, aims to improve the strategic autonomy of the European economic and financial sector by reducing dependence on external infrastructures.
The Instant Payment Regulation represents a significant leap towards improving the efficiency and security of retail payments within the Eurozone. By facilitating instant credit transfers, the regulation aims to make the European payment system more competitive globally. Moreover, the introduction of stringent anti-fraud measures underlines the EU’s commitment to safeguarding consumer transactions against fraudulent activities.
As digital finance continues to evolve, such regulations ensure the financial ecosystem remains resilient, transparent, and trustworthy. With the European Union setting a high standard for instant payments, the expectation is for a ripple effect, encouraging further innovations and improvements in global payment infrastructures.
Key aspects of the new regulation
According to the new Regulation, an instant credit transfer is a transfer executed immediately, twenty-four hours a day and on any day of the year.
All payment service providers (“PSPs”) that offer the execution of credit transfers to their users (so-called payment services users or “PSUs”) will also have to offer PSUs the possibility of executing instant credit transfers, which must be processed without delay and ensuring that the funds reach the payee’s payment account in the currency of denomination of the account within ten seconds; within the same time frame, the payer must receive confirmation of execution.
The transitional period will be shorter in the euro area than in the non-euro area, and payment and e-money institutions will be obliged to offer the instant credit transfer service after a transitional period.
The Instant Credit Transfer Regulation also sets uniform costs, prohibiting PSPs from charging payers and payees fees for sending and receiving instant credit transfers that are higher than the fees applicable to other credit transfer services of a corresponding type (‘credit transfers of corresponding type’).
The new rules also require payment service providers to verify the correspondence between the IBAN and the name of the beneficiary in order to prevent errors or fraud. Significant anti-fraud measures related to the security of instant credit transfers introduced, include:
- Verification of the Payee: PSPs are required to implement specific protocols enabling the payer to verify the recipient’s identity before conducting a transaction, along with a system for checking duplicate payment requests.
- Limiting Transfer Amounts: Payers should be able to set a maximum limit for instant transfers, a feature that PSPs must support to reduce the risk of fraud that could drain accounts if online credentials are compromised.
- Uniform Screening Procedures: To avoid inefficiencies and disruptions from varied PSP screening methods, a unified approach to screening is essential. PSPs must verify daily if their clients are individuals or entities subject to EU sanctions, especially following the introduction or amendment of financial restrictions.
Concerning the speed of funds transfer, it has been mandated that all payment service providers (PSPs) offer their clients access to the instant credit transfer service around the clock, ensuring transactions are completed in under ten seconds and the beneficiary receives their funds immediately.
Instant Payment Regulation and the future of eurozone payments
The Regulation (EU) 2024/886, effective from April 8, 2024, introduces significant changes to instant credit transfers in euros, emphasizing speed, cost-efficiency, and anti-fraud measures. Aligned with the EU’s Retail Payment Strategy, it mandates round-the-clock access to instant payment services, equal pricing for instant and standard transfers, and introduces robust security protocols against fraud. This regulation aims to enhance the Eurozone’s payment system’s efficiency and security, reflecting the EU’s commitment to modernizing financial services in the digital age. Depending on their location within or outside the Eurozone, PSPs are required to comply with the new regulations within a timeframe of 9/18 to 33/39 months.
The new regulations align with the “Retail Payment Strategy” within the Digital Finance Package unveiled by the Commission in September 2020,[6] aiming to ensure the prompt availability of funds transmitted via credit transfer. Additionally, the SEPA Regulation, which includes specific provisions for instant payments in euros alongside general regulations for all credit transfers and direct debits in euros, is notably impacted by the advancements introduced by the Regulation.
The adoption of the Instant Payment Regulation is a critical step in the EU’s broader strategy to modernize its financial services sector, particularly in response to the increasing demand for faster and more secure payment methods. This regulation not only enhances consumer experience by reducing transaction times but also aligns payment service providers with modern security standards essential in the digital age.
Looking ahead, the successful implementation of these measures is expected to stimulate further advancements in payment technologies, driving the European market towards greater digitalization and financial integration. As the Eurozone continues to adapt to the fast-paced changes in digital finance, regulations like these play a pivotal role in ensuring the stability and integrity of its financial system.
References
- Regulation (EU) 2024/886 of the European Parliament and of the Council, 13 March 2024. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:L_202400886. ↑
- European Commission, Capital markets union (2014). Available at: https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/capital-markets-union_en ↑
- Regulation (EU) No 260/2012 of the European Parliament and of the Council, 14 March 2012 Available at: https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32012R0260. ↑
- European Central Bank, Our Retail payment strategy. Available at: https://www.ecb.europa.eu/paym/integration/retail/retail_payments_strategy/html/index.en.html ↑
- Council of the European Union, Capital markets union: Council agrees its position on the instant payments proposal, 22 May 2023. Available at: https://www.consilium.europa.eu/en/press/press-releases/2023/05/22/capital-markets-union-council-agrees-its-position-on-the-instant-payments-proposal/ ↑
- European Commission, Consultation on a retail payments strategy for the EU (2020). Available at: https://finance.ec.europa.eu/regulation-and-supervision/consultations/2020-retail-payments-strategy_en ↑
