On Wednesday 26 October, the European Commission adopted a legislative proposal to make instant euro payments available to all individuals and businesses with bank accounts in the European Economic Area, which includes the 27 EU Member States, Iceland, Liechtenstein and Norway.
“This should have happened organically, but it didn’t. I want to unleash that power, because it might take a decade to become the norm”, explained Mairead McGuinness, EU Commissioner for Financial Services, at a press conference.
Announced in September 2020 along with the Payment Strategy (see EUROPE 12567/1), this proposal is at the heart of the revision of the Payment Services Directive ‘PSD2’ and is part of the European Commission’s digital finance strategy.
Instant payments allow people to transfer money 24 hours a day, 7 days a week, within ten seconds. This is much faster compared to traditional transfers, which are only received by payment service providers during business hours and only reach the payee’s account on the following business day, which could take up to three calendar days.
This type of payment is an advantage for consumers, but also for merchants, since it allows them to maintain cash flow. This will also benefit SMEs, Fintech, NGOs, and administrations.
Money currently locked in transit in the financial system – the so-called ‘payment float’ – will be released and can be used sooner for consumption or investment. That is almost 200 billion euros locked on any given day. At the beginning of 2022, only 11% of all euro transfers in the EU were instant.
The text is based on four pillars: - make instant payments mandatory, not optional; - make these payments affordable; - oblige providers to check that the bank account number (IBAN) matches the name of the beneficiary provided by the payer in order to alert the payer in case there is a mistake or fraud; - check daily, rather than every time, that transactions are not carried out by people who are being investigated as per the EU sanctions lists.
Once the text is adopted by the co-legislators, the obligation to offer the service to receive such payments will apply after six months, followed by the obligation to offer the service to send such payments, which will apply after 12 months.
MEP Markus Ferber (EPP, German) welcomed the European Commission’s announcement in a statement: “It is the right move to make instant payments the new standard for European payments . He added: “The key point to ensure a fast and comprehensive take-up of instant payments is to make sure that consumers can feel as confident using instant payments as using regular SEPA transfers.
“Relying on a daily client database screening, instead of forcing both the sending and the receiving bank to screen each and every cross-border transaction, will allow banks to offer pan-European innovative solutions while ensuring full compliance with anti-money laundering and anti-terrorist financing rules and targeted financial sanctions regulations”, said Fabrice Denèle, CEO of BPCE Payment Services and Chair of the European Savings Banks Group (ESBG) Committee.
Carlo Miani, Director of Strategic Communications at FTI Consulting, expressed his reservations in a statement in relation to the 6-month deadline for payment service providers, which he considers to be “too narrow” and “could endanger the safety and security of transactions”.
To read the proposal: https://aeur.eu/f/3st (Original version in French by Anne Damiani)