Acronyms galore: those in the financial services industry must fully understand the ins and outs of the
European Union’s (EU)
Instant Payments Regulation (IPR) – that intends to ensure real-time payments are standardised in the
Single European Payments Area (SEPA) – to bolster the digital economy and serve the evolving needs of
consumers and businesses.
Further, the IPR aims to introduce enhanced security measures for faster transactions; remove barriers such as security concerns, accessibility gaps, and operational challenges; and enable PSPs to offer more value-added services and features to their customers.
Overview of the Instant Payments Regulation
The IPR aims to expand and streamline the use of instant payments, ensuring that consumers and businesses can send and receive money in seconds, 24/7, with no delays.
As covered in the Future of Payments 2025 report: “In April 2024, the EU’s Instant Payments Regulation entered into force, with European
banks and payments services providers (PSPs) having to comply with the first set of obligations by 9 January 2025. What this means is 2025 will be the first full year where all European banks and PSPs are mandated to offer instant euro transfers at the same
cost as regular transfers, and for banks to receive instant credit transfers.”
In an interview for the report, Erwin Kulk, head of service development and management,
EBA CLEARING, clarified that instant payment volumes will indeed “increase significantly over the next few years, but only if customers experience instant
payments as convenient and safe.” This is where the IPR will be instrumental, but there are obstacles to overcome such as those listed below:
- Networks may become fractured,
- Structures built upon legacy infrastructure may be difficult to update,
- Anti-fraud and AML procedures may not place before payments are made,
- Returns may be diminished,
- Competition with other instant payment offerings aimed at convenience such as cash, cards or digital wallets.
These challenges should have been resolved or financial companies should have found ways to work around them by speeding up their digitisation processes so that instant payments can be implemented, agility and time to value is increased, new business opportunities
through value-added services and innovation are pursued – at a reduced total cost of ownership.
Key requirements of the Instant Payments Regulation
The regulation requires that instant payments be available to all customers who wish to use them, with specific standards for technical interoperability across EU borders.
Instant payments must be processed and settled in real-time, providing seamless transactions.
In addition to this, banks must offer these services without charging exorbitant fees, ensuring that instant payments are accessible to a wide range of consumers and businesses.
As explored by senior content manager Dominique Dierks in a Finextra long read, the fundamentals of instant payments and their impact
on the financial sector must be comprehended and implemented. Real-time payments take place in five steps: initiation, authorisation, processing, confirmation, and settlement.
How significant is the 9 January 2025 IPR deadline?
After the IPR came into force in April 2024, which introduced new mandatory requirements for instant credit transfer in the Euro, 9 January 2025 marks a significant milestone in the EU’s push for instant payments. This week, the IPR states that Eurozone-based
banks must be able to receive instant credit transfers.
Banks will need to receive instant payments by January 2025, with full initiation capabilities mandated for June 2025. Non-euro countries have until January and July 2027 respectively for receiving and initiating payments.
Non-compliance can lead to potential penalties of up to 1% of annual turnover for serious violations. In addition to this, a portfolio view on compliance will need to be adopted to optimise processes and reduce costs.
This will mean an integration of the IPR with other regulations, such as the
Wire Transfer Regulation (WTR),
Payment Services Directive 3 (PSD3), and
Anti-Money Laundering Directive 6 (AML6), among others.
Implications for consumers
Instant payments will provide consumers with the ability to make fast, secure, and convenient transactions at any time. Instant payments should improve efficiency in
cross-border transactions, which could have a profound effect on businesses and international transfers within
the Eurozone. Consumers will likely benefit from broader access to financial services, especially those in underserved or remote areas.
Impact on businesses
Businesses can expect faster settlement times, improving cash flow management and reducing the reliance on traditional banking hours. The new regulation could spur
innovation in payment processing, opening the door to new fintech solutions. There may be both costs
and savings for businesses adopting the system, with the cost of instant payments often being lower than traditional methods.
The future of instant payments
The IPR is one facet of the EU’s broader strategy for digital finance, enhancing the digital economy and financial inclusion. There is also potential for the EU’s approach to be adopted by other regions, and could possibly set a global standard for instant
payments. Nevertheless, efforts to improve the system must be ongoing, and upgrades to payment infrastructures must be made to allow for compliance to additional regulation that are expected in the future.
The 9 January deadline is important, because of what it means for the future of payments in the EU. Businesses and consumers must stay informed about the changes and what steps they need to take to benefit from the new instant payment capabilities.
Jan Van Vonno, head of industry and wallets,
Tink, agreed and said that: “In recent years, we have seen instant payment services explode in markets such as Brazil, Thailand and India - with these three markets alone accounting for 179 billion transactions in 2023, according to central bank
data. Meanwhile in the EU, progress has been uneven and fragmented - despite the 2017 SEPA Instant Credit Transfer Scheme promising to usher in a new normal. By levelling the experience across the EU with the arrival of Eurozone-wide instant payments, we overcome
one of the major barriers to instant A2A payments going mainstream. IPR will encourage greater adoption of Pay by Bank - a payment method that is fast, simple, secure, low cost and reliable. For merchants, it provides absolute certainty and confidence - they
can see the funds arrive in their account in seconds. This eliminates the need for any kind of payment guarantee scheme, and helps them manage cashflow and remain liquid in an operating environment when working capital might be squeezed. It also provides the
necessary certainty to support cross-border commerce as merchants can be completely confident that within seconds they will receive funds from any transaction from anywhere within the Eurozone. For consumers, it provides speed, control and simplicity - wherever
they shop across the Eurozone. That’s why the implementation of IPR is a major innovation milestone for payments in Europe - taking us a big step closer to creating a pan-European payment solution that is available to everyone.”
Richard Albery, head of solution consulting banking Europe,
ACI Worldwide, mentioned: “2025 will be a historic year for payments in Europe. The new instant payments mandate will transform the European payments landscape with faster, frictionless and more secure payments for consumers and businesses, and
ultimately lead to innovation with the introduction of new user-friendly services. However, January 9 is just the starting point for what will be a transformative year for European financial institutions. Until now, many banks have implemented tactical solutions
for lowest cost of compliance. The big deadline and the game changing moment for European payments, however, will come in 10 months, on October 9, when banks need to be able to send instant payments. Most banks in Europe will have their work cut out to be
ready for that date: They need to upgrade their IT systems and real-time infrastructure to make sure they can handle the expected migration of traditional credit transfer volume and organic increase driven by consumer convenience. They also need to ask themselves
what services their consumer and corporate customers require and prepare accordingly, as offering the ability to send instant payments will become the new commercial imperative in Europe. The new regulation is expected to drive instant payments volume across
the SEPA region, including the 27 EU member states. According to ACI’s 2024 Prime Time for Real-Time report, instant payments are forecast to account for 13% of all electronic payments in Europe by 2028, up from 8% in 2023. However, a look at other regions
around the globe reveals that Europe is still catching up. For example, in the Asia Pacific region, instant payments are expected to comprise 29% of all electronic payments by 2028 – in Latin America, that number grows to 50%, and in Africa, 57%. Financial
institutions and other stakeholders need to think of the new mandate beyond regulatory compliance and treat this as an opportunity to deliver value to consumers and businesses through domestic and cross border use cases.”
Jonathan Arler, Netherlands general manager,
payabl, added that: “Europe led the world in payments. 14 years ago, the UK pioneered the first instant payments system. 10 years ago, Europe was the first to standardise payments across 32 countries with SEPA. With PSD2/Open Banking, another area
Europe pioneered, the A2A payments opportunity emerged that would offer instant, secure and low-cost payments both domestically and across borders. The potential was transformative, but progress was slow. Over time, the market has been overshadowed by other
regions with India's UPI scheme regarded as one of the most successful globally. The implementation is a major step in catching up with these other regions. Cast alongside the Wero wallet which is gathering momentum across the continent with millions of users,
it feels like Europe is "back to the future" of payments. However, today's 9 January deadline is a vital milestone, not the finish line. By this date, all PSPs must be able to receive instant payments. This requirement sets the stage for broader compliance,
including the ability to send instant payments and verify payees by October 2025. Verification of payee additionally becomes mandatory across member states on the same day. With 1% of annual turnover fines for those in serious breach of the rules, it's clear
that policymakers are choosing the stick over the carrot to drive the European payments market forward.
Laurent Descout, founder and CEO,
Neo, highlighted that: “The rollout of instant payments in Europe is a game-changer for liquidity and treasury management. This January, payment service providers in the Eurozone must be ready to receive instant transfers and credit payees’ accounts
in just ten seconds. This real-time settlement capability reduces transaction costs, boosts working capital and simplifies reconciliation. Importantly, aligning charges for instant and standard transfers ensures instant payments are not only faster but also
cost-efficient. Faster payments mean lower settlement risk and greater cash flow flexibility—vital for corporates operating across borders. The regulation promises to cut friction, unlock convenience and open new business opportunities across Europe. With
the right partners, businesses of all sizes can leverage cutting-edge tech to sharpen their treasury operations and stay ahead of the curve. PSPs now have nine months to be ready to send instant payments by October, supported by a free verification of payee
service.”