Understanding SEPA instant payments and how it transforms the EU payments landscape
Exploring the regulatory framework, opportunities, and impact of SEPA instant payments on businesses and consumers.
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Since the launch of the SEPA Instant Credit Transfer Scheme in 2017, adoption levels have varied significantly across EU markets. While the average adoption rate stands at 62%, the scheme’s optional nature has led to slower uptake in certain regions. For instance, Ireland has seen adoption rates as low as 5%. As a result, many consumers, businesses, and local economies are unable to take advantage of the benefits offered by an instant payment infrastructure.
In response to the increased demand from consumers, fintechs, and businesses for a new era of instant payment products and services, SEPA instant regulation has mandated that all eligible financial institutions adopt the scheme through a phased implementation plan, starting in January 2025. The aim of this regulatory drive is to address this disparity and accelerate widespread implementation.
Future regulations and deadlines
With mandates and regulations come deadlines. The initial phase focuses on credit institutions, with two key milestones to meet: by 9 January 2025, credit institutions across Europe must be able to receive SEPA instant payments, and by 9 October 2025, they must be able to send them.
Staying ahead of these deadlines is crucial for institutions to not only unlock the competitive advantages of SEPA instant but also ensure compliance. Moreover, several complementary regulations align with SEPA Instant, collectively aimed at fostering a faster, safer, and more innovative payment ecosystem across the EU.
One such regulation is Verification of Payee (VoP). Similar to the UK’s Confirmation of Payee (CoP), the EU will implement a name-checking service to strengthen trust, security, and fraud prevention. In a real-time network, this service will notify customers immediately if the name and IBAN match, reducing the risk of misplaced or misdirected payments caused by errors or fraudulent activity.
PSD3
Beyond VoP, PSD3 is on the horizon and eagerly anticipated across the EU payment landscape. Reflecting on the evolution of the Payment Services Directives, the transition from the first Payment Services Directive (PSD1) to the revised Payment Services Directive (PSD2) in 2018 marked significant progress in making electronic payments easier, faster, and safer for consumers and payment service providers alike. The EU Commission is currently reviewing PSD2, and a legislative proposal for PSD3 is expected to be announced soon.
With EU-wide initiatives, a range of payment visions and strategies have also been developed at the local level. Closer to home in Ireland, the National Payment Strategy was recently released, outlining several key outcomes for the future of Ireland’s payment landscape. The strategy highlights areas such as the future role of cash, payment resilience, fraud prevention, account-to-account payments, and the overall direction of the payments ecosystem.
The opportunities opened by SEPA instant payments
The widespread implementation of SEPA instant payments unlocks a range of new possibilities. Below, we’ve highlighted some of the key benefits it offers to stakeholders.
Real-time financial transactions
Immediate access to funds for individuals and businesses enhances liquidity, cash flow, and access to services or new, pioneering products in the market. The SEPA Instant Credit Transfer Scheme allows up to ten seconds for the payer’s and payee’s payment service providers, along with the clearing system, to process the transaction and make the funds available in the payee’s account, creating a real-time payment network for nearly 750 million people.
Enhanced customer experience
Access to an instant payment network leads to higher satisfaction and trust among customers and clients, all at no extra cost. Instant confirmation and access to payments and financial data accommodate enhanced digital expectations.
Business flexibility and speed
With businesses’ ability to access real-time financial data, SEPA instant payments enable faster funding, increased cash flow, more agile products, and enhanced decision-making.
Unlocking account-to-account payments
Account-to-account payments are identified as a key objective in many national payment strategies, as well as at the EU level, and are seen as a viable competitor to card schemes like VISA and Mastercard. Successful alternatives in the market, such as UPI and PIX, operate on the foundation of a real-time payment network. This network is essential for the adoption of account-based payments. In 2023, UPI processed 117 billion financial transactions, totalling 2.19 trillion dollars in value, showcasing the scale and success of this system.
Maximising the potential of SEPA instant payments: Embracing innovation and navigating regulations
At Fire, we believe that SEPA instant payments represent a pivotal shift toward a more interconnected and efficient financial ecosystem. While the opportunities are vast, the accompanying regulatory requirements require careful attention. It is crucial that these regulations do not create barriers to innovation and competition.
Access to an instant payment system is just the first step toward a truly digital age. Being able to leverage and fully benefit from a real-time infrastructure is where Fire believes businesses will have the opportunity to differentiate themselves in the market. By partnering with an integrated provider and enabling automated payment processing, instant payments can be fully unlocked, offering access to more digital and instant products.
Overall, we firmly believe that the widespread adoption of instant payments across the EU will have a positive impact on fintechs, financial institutions, businesses, and consumers alike. The foundation of instant payments will drive innovation – freeing up cash flow, integrating systems, and offering enhanced services, all to the benefit of the end consumer. For instance, a retailer receiving instant payment confirmation can immediately release goods to customers, ensuring faster delivery without waiting for traditional clearing cycles. This enables businesses to improve customer satisfaction by reducing wait times, optimise inventory management, and streamline operations.
Navigating SEPA instant’s regulatory framework is crucial for maximising its benefits. Instant payment networks bring increased liability and risk, prompting regulated institutions to enhance their KYC, AML, and fraud monitoring tools. We see future regulatory updates as opportunities to drive innovation in compliant payment processing, creating a more resilient and efficient payments landscape through integrated and embedded solutions.
Embrace the Future of Payments
SEPA instant payments signal a transformative step towards a faster, more efficient, and interconnected financial ecosystem. By addressing regulatory challenges and embracing the opportunities these networks present, businesses, financial institutions, and fintechs can unlock immense benefits, including enhanced liquidity, streamlined operations, and improved customer experiences.
As adoption accelerates, the potential for real-time payments to drive innovation across industries becomes clear. With proper implementation and strategic partnerships, SEPA instant payments can not only enhance the EU’s payment infrastructure but also lay the foundation for a more inclusive and dynamic financial future.
At Fire, we are committed to helping businesses navigate this new era of instant payments and unlock their full potential. We empower businesses to launch new or more efficient payment products and services. With SEPA Instant, the next wave of businesses will seize the opportunity to outpace the competition with cutting-edge solutions. Stay ahead of these changes by discovering how Fire can help your business leverage SEPA Instant to fully embed and automate payment processing. Contact us today to explore solutions tailored to the latest in SEPA instant payments technology and evolving regulations.
