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European Union
The European Commission has adopted a draft Regulation to hasten the introduction of immediate credit transfers in euro as part of its 2020 Retail Payments Strategy.
The plan would make fast payments in euros available to all individuals and organizations
with EEA bank accounts in an effort to promote innovation and competition in the EU payments sector. The goal is to make instant payments in euros accessible, safe, and hassle-free across the entire EU.
In addition to giving a quick overview of the current laws governing instant payments in the UK, Ireland and France, this article also briefly examines the Commission's proposal.
Keeping up with modifications in the payments industry
The first pillar of the Commission's September 2020 Retail Payments Strategy, which reaffirmed its goal of promoting the full adoption of instant payments in the EU, is "increasingly digital and instant payment solutions with pan-European reach," and it is this pillar that the Commission's proposed Regulation aligns with. The Commission's Digital Finance Strategy and the Strategy were both adopted at the same time, but separately.
In light of the speed and scope of technological change in the payments industry, this was done in acknowledgment of the necessity for focused policy actions relating to retail
payments outside the purview of the Digital Finance Strategy.
The Commission suggested that it was considering enacting a regulation on quick payments when it held consultations on a roadmap for an EU-wide instant payments system in March 2021. (at that point the timing for this was Q1 2022).
The draft roadmap was followed by two additional consultations in the same month: one targeted at payment service providers (PSPs) and including the Commission's consultation strategy for the initiative on instant payments in the EU, and the other open to the general public on how to guarantee that instant payments are widely accessible and utilized in the EU. In the summer of 2021, both consultations came to an end.
What is suggested?
The Regulation, which consists of four requirements, would change the Cross-Border Payments Regulation ((EU) 2021/1230) and the Single Euro Payments Area Regulation ((EU) 260/2012).
- Making instant euro payments widely accessible, with a requirement that EU PSPs that already provide credit transfers in euros do the same within a specific timeframe.
- Making affordable instant payments in euros, with a requirement on PSPs to make sure the cost of quick payments in euros does not outweigh the cost of conventional, non-instant credit transfers in euros.
- Increasing trust in immediate payments by requiring PSPs to check that the beneficiary's name and bank account number (IBAN) match in order to notify the payer of any potential errors or fraud before the payment is made.
- Removing obstacles to fast euro payment processing while maintaining the effectiveness
of screening for individuals who are subject to EU sanctions. Instead of manually reviewing each transaction, PSPs will at least daily check their clients' names against EU sanctions lists.
What is the status of instant payments in the UK and other significant EU members?
British Empire
The UK was a pioneer in quick payments thanks to the 2008 launch of the Faster Payments System (FPS). Pay.UK, the acknowledged operator and standards organization for the UK's retail interbank payment systems, manages FPS.
FPS was created to make it easier for standing orders, internet, phone, and mobile payments
in UK pound to travel rapidly and securely between UK bank accounts, around-the-clock, every day of the year. Prior to this, money transfers between bank accounts took around 3 days.
The service enables real-time payments of up to £1 million, although companies that provide the service can set their own caps based on the method of delivering the money and the type of account that their client is transferring from.
FPS performed 3.4 billion transactions worth £2.6 trillion in 2021, a 20% rise in volume over the previous year (568 million payments) and a 24% increase in value (up from £2.1 trillion in 2020).
The number of direct FPS participants has more than tripled since the introduction
of a new access program in 2014, and more are still in the works.
The first non-bank joined as a direct participant in 2018 when the Bank of England introduced new rules allowing them to open settlement accounts.
Faster Payments (and Bacs) will be phased out in the coming years in favor of Pay.UK UK's New Payments Architecture (NPA), which is now being developed. The NPA aims to develop a system that is simple to use, simple to update, and simple to innovate on. Develop a real-time payment capability to give those who send and receive payments more options as one of the guiding principles for the design and delivery of the NPA.
The CHAPS payment system, which is a sterling same-day system run by the Bank of England (BoE), is used to settle time-sensitive, lower-value transactions like the purchase of a home or making a down payment.
The Real Time Gross Settlement (RTGS) system of the BoE is used to settle payments.
More than 30 direct participants make CHAPS payments directly, and more than 5,000 financial institutions do so via one of the direct participants.
Ireland
There is presently no industry-wide instant payments option in Ireland.
A mobile account-to-account solution based on SEPA infrastructure is being developed by Irish retail banks to enable rapid mobile payments. The joint venture has got authorisation from the Competition and Consumer Protection Commission and will soon debut its mobile payment app.
France
On the basis of the SEPA Instant Credit Transfer guidelines, which were announced in 2017,
a number of PSPs provide SEPA instant credit transfers on the French market.
Despite this, I some PSPs, including credit institutions, still do not provide their customers with this service, and (ii) there is no market standard for the fees that are levied for its delivery (i.e., while some PSPs provide the service free of charge, others may charge up to €1 for an instant credit transfer).
Next actions
Through its Have Your Say website, the Commission has opened a public consultation and is seeking input on its proposal. Although a notice on the webpage claims that the eight-week comment process is being extended every day until the adopted proposal is available in all EU languages, the current deadline is 26 December 2022.
The plan includes timeframes for phased implementation that have been adjusted for the initiative's many components and to account for members of the euro area and those who do not belong to it. Additionally, it stipulates that it will become effective 20 days after being published in the EU Official Journal.
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