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Impact of New Instant Payments Regulation

Delve into the organizational and technical impacts of these new regulations. We describe the features and impacts of the regulations and detail how we help banks and financial institutions, both from a technical and a business perspective.

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Features and Impacts of Instant Payments Regulation

The Instant Payment Regulation (IPR) introduces a harmonized regulatory framework for instant euro transfers, representing a turning point across Europe.

What are Instant Payments? 

On February 7, 2024, the Instant Payment Regulation (IPR) was approved by a majority of MEPs. The regulation is the result of an October 2022 European Commission proposal to make so-called "instant payments" available throughout the EU.

Key Pillars of Instant Payments

  • Guarantee an instant payment service in euros.
  • Making instant euro payments affordable for everyone.
  • Removing obstacles of adopting an instant transfers system.
  • Make instant payments easier to process.

Timeline Expectations

  • January 2024: the final version of the regulation was published.
  • The IPR was published in the EU official journal on 19 March 2024.
  • Banks should initiate projects as of now to meet the new regulatory requirements within the imposed deadlines:
    • January 2025: Daily verification of customer base on lists (sanction screening) & Receiving SCT Inst in euro, 24/7, from eurozone banks.
    • October 2025: Sending SCT Inst in euro, 24/7, from eurozone banks.
    • April 2027:
      • Receiving and sending SCT Inst in euro, 24/7, from Eurozone-based EMIs and PIs.
      • Receive SCT Inst in euro, 24/7, from non-eurozone based EMIs and PIs.
    • January 2027: Receive SCT Inst in euro, 24/7, from non-eurozone-based PSPs other than EMIs and PIs.
    • July 2027:
      • Sending SCT Inst in euro, 24/7, from non-eurozone-based PSPs other than EMIs and PIs.
      • Sending SCT Inst in euro, 24/7, from non-eurozone-based PSPs other than EMIs and PIs.

Characteristics of the SCT INST

The regulatory framework has led to the following four major innovations.

Characteristics of the SCT INST

Erasing differences between Sepa Credit Transfer and Instant Payments

Customers will pay based on the same conditions between SCT Inst & SCT standard.

Erasing differences between Sepa Credit Transfer and Instant Payments

These new regulations will bring about an important increase of Instant Payments. This increase in volume had to be considered as soon as possible to best capitalize on the industrialization of this service.

Industrialization of Instant Payments

Business Structures Impacted by the Switch to Instant Payments

The obligation to adapt to the use of Instant Payments introduced by the new European regulation will require adjustments of a technological, normative and organizational nature. The impacts will involve many structures within the organization that will need to review their current processes.

Business Structures Impacted by the Switch to Instant Payments

Regulatory Context

The new Instant Payments Regulation fits neatly within a regulatory framework that is already filled with numerous regulations that, taken together, are intended to regulate the entire payments and financial sector.

  • Retail Payment Strategy: Aim to achieve a higher level of efficiency, strategic autonomy and resilience in retail payments, as well as supporting digitalisation and innovation.
  • Digital Finance Package: Supports the EU’s ambition for a recovery that embraces the digital transition.
  • PSD3: Prioritizes enhancing payment services, boosting customer protection, and establishing equal conditions for payment service providers.
  • PSR: Emphasizes the regulation of payment systems to maintain transparency and security

Focus on Security within Instant Transfers

The new rules also require payment service providers to verify that the IBAN code matches the payee's name to prevent errors or fraud. The Regulations also introduce new and specific ways for PSPs to sanction screenings of PSUs for the purpose of verifying that payers and payees are not subject to restrictive financial measures.

Instant Payments and Fraud Detection

Instant Payments and Fraud Detection

Financial institutions should consider adopting a holistic approach to combating fraud, particularly in cases where existing anti-fraud solutions and processes may be based on batch processing or manual intervention. Below is an overview of the actions financial institutions should take.

A. Model 

  1. Construction of a centralized Competence Center for Instant Payments, to handle system reports 24/7 by unlocking customer operations.
  2. Introduction of additional checks, meeting regulatory requirements, in case of periodic Instant Payments (e.g., for salaries).

B. Customer Care

  1. Call Center Management as external companies not associated with banking or credit contracts. They are handled by vendors with specific contracts (e.g., KPIs and on-call compensation).
  2. 24/7 Call Center operations.

C. Fraud Management 

  1. Significant reduction in the number of frauds on Instant Payments by digital native banks, for three reasons:

    -generally younger consumer base;

    -more advanced fraud prevention tools;

    -better customer contact through digital channels.

D. Awareness for Customers 

  1. Education and awareness around fraud, high budget spent on this issue.

  2. Free training via webinar to describe how the service works and define how to reach out in case of fraud (to limit stolen identity and app compromise).

E. Operational effectiveness

  1. Initial investment in a fraud management model: customer-facing with organizational interventions started earlier.

  2. Pre-screening and list checks will remain active in addition to new controls required by regulations.

F. IT Investments

  1. Evaluation of the adoption of new Open Finance tools (such as CBI services for Italy for example) to foster collaboration with other PSPs.

  2. Enhance the use of AI tools to recognize fraud patterns. To date, positive effects are noted where they are introduced.

  3. Change in solutions, from a reduced proportion of peers. Alternative applications are sought that enable predictive fraud insights (e.g., CLEAFY). 

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How can Sia Partners Help?

At Sia Partners, we support financial institutions in navigating the evolving landscape shaped by Instant Payments. Here’s how we can assist:

  • Instant Payments Value Proposition: We help organizations capitalize on instant payments opportunities by leveraging our expertise in developing innovative financial products and services. Our knowledge of the payments market enables our clients to promote business growth through solutions that are in line with regulations.
  • Benchmark Analysis: With our expertise in market research, we help our clients find out how industry competitors are doing and learn about best practices to improve business success.
  • Fraud Risk Assessment: With a deep understanding of regulatory frameworks of IP, we help our clients define framework in the assessment of fraud risk, following system best practices and related integration mechanisms.
  • Target Operating Model: With our expertise in business process design, we help our clients design a new organizational and operational model and sizing facilities impacted by the new regulations.

By partnering with Sia Partners, financial institutions can confidently address the complexities of Instant Payments, ensuring innovative growth and regulatory compliance.

Sia Partners support

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