At the beginning of 2022, only 11% of all Euro credit transfers in the EU were instant, and the European Commission wants to fix this and make them all instant. The Single Euro Payments Regulation (SEPA) aims to enable both institutions and consumers to benefit from transfers and payments of under 10 seconds – 24/7/365. SEPA includes 27 European Union countries, 4 European Free Trade Association countries (Liechtenstein, Norway, Iceland, and Switzerland), four microstates (Vatican City, San Marino, Monaco, Andorra) as well as the UK. Payments providers must be able to send instant payments by October 2025 and receive them no later than January 9, 2025.
According to a note received by CI today, most European banks believe these deadlines will be met.
Research from RedCompass Labs shows that 58% of EU banks without an instant payment offering believe timelines are unrealistic, while nearly a third aren’t confident of meeting the deadlines. At the same time, the majority (77%) recognize that the benefits outweigh the costs, and 55% intend to offer instant payments as the default payment option for their clients in the future.
The report states that, on average, European banks aim to be capable of processing between 101 and 300 payments per second by the end of 2025, while just 5% said they were targeting above 1000.
RecCompass states that given bulk payment files can contain hundreds of thousands of payments that need to be processed as soon as possible; banks should aim to be able to process at least 1,000 payments per second.
The report states that the top five challenges facing banks in offering instant payments are
- making adaptations to customer channels, including offering a confirmation of payee service (25%),
- implementing KYC and sanctions screening provisions (21%),
- processing more volumes and scaling throughput (22%),
- creating a business case for value-add instant payment offerings (20%) and
- 24/7 availability (20%).
Tom Hewson, CEO at RedCompass Labs, says that SEPA brings big challenges as financial services firms may need to upgrade their infrastructure to make it all possible.
“Our research shows that there is understandably some trepidation about the proximity of the timelines and a possible underestimation of how much they need to scale their throughput and invest. As there is no cookie-cutter solution that will work for all banks, we can expect to see an exploration of alternative approaches that don’t require them to change their core banking systems. That said, they also recognise that instant payments open new opportunities such as displacing card providers, providing a better service to their corporate customers and driving competition in the market. This positivity about the move to instant payments from those tasked to deliver it should give the industry, regulators, businesses and consumers confidence that banks will implement the changes required and herald a new era in European payments.”