The European Union Council has adopted new rules that require instant payments in euros to be fully available in the EU. Customers will be able to transfer euro-denominated money within 10 seconds at any time, even outside business hours, to any other EU member state. The move is widely expected to help European payments companies compete on a more equal footing with Visa and Mastercard, according to Reuters.
The law is expected to go into effect in April. Banks located in the eurozone are required to begin allowing instant payments within 18 months of that date. Banks in the non-eurozone area have until 2027 to comply and until 2028 to allow instant payments made from an account in a local currency.
Payment service providers that offer standard credit transfers in euro will also be required to both send and receive instant payments in euro. If banks apply any charges for these services, they must be no higher than for standard credit transfers.
A Needed Change
The landscape for instant payments in the EU has been fairly desolate prior to this new initiative. Several EU countries allow free transfers that take a day or two, but true instant payments are offered at a higher rate and cannot be used for cross-border transactions. SEPA (Single Euro Payments Area), the existing EU network, allows for cross-border transactions between EU countries, but countries can transact only in euros, and uptake has been slow.
The instant payment rules were first proposed in October 2022. At the time, Mairead McGuinness, the Financial Services Chief at The European Union, described the move as “seismic and comparable to the move from mail to e-mail.”
Analysts have expressed a great deal of enthusiasm for the new instant payments protocol.
“Mandating a requirement and having it go into action are two vastly different things, but I am very optimistic about this announcement,” said Albert Bodine, Director of Commercial and Enterprise Payments at Javelin Strategy & Research. “ASEAN [the Association of Southeast Asian Nations] already has a regional play, and the EU is the next logical one. We can add to the list the announcement of India’s UPI and Google Pay. Regional cross-border is the first step in achieving global, cross-continent, cross-ocean transfers. Global instant payments are imminent.”
