On 19 March 2024, the Regulation (EU) 2024/886 of 13 March 2024 as regards instant credit transfers in euro (the “Instant Payment Regulation”) was published in the Official Journal. This Regulation will allow anyone to make instant credit transfers in euros from one payment account to another payment account within the European Union (“EU”).
Some background
While instant payments (i.e. credit transfers where funds are available immediately upon initiation of the payment on the payee’s account) have been technically feasible since the end of 2017, in 2021 still only 11 percent of all credit transfers in euro in the EU were instant.
Solving that issue is the goal of the Instant Payment Regulation, which aims at ensuring a general use of instant payments throughout the EU by (i) making it mandatory for payment service providers located in the EU and (ii) removing different barriers to its adoption (such as lack of trust, high costs, etc.).
The impact of the Instant Payment Regulation will however not stop there as it contains other important rights and obligations for payment service providers, being:
- an obligation, for all credit transfers, to check (to some extent) the payee’s details communicated by the payer;
- the right for payment service providers to access payment schemes.
What is an instant credit transfer?
An instant credit transfer is an electronic payment from one payment account to another that is executed (i) immediately, (ii) 24 hours a day and (iii) on any calendar day.
However, it should be noted that not all instant credit transfers fall in the scope of the Instant Payment Regulation: only those (i) in euro and (ii) where both the payment service providers of the payer and payee are located in the EU (“Instant Payment”).
Who must offer the possibility of sending or receiving Instant Payment?
All payment service providers (i.e. not only credit institutions but also potentially electronic money and payment institutions) will have to offer that new functionality if they offer the service of sending and receiving instant credit transfers to their clients (altogether referred below to as the “PSPs”).
What does the Instant Payment Regulation entail in practice?
Sending and receiving Instant Payment
All PSPs must offer the possibility to send and receive Instant Payments to (i) all their clients (“payment service users” or “PSUs”), (ii) on all accounts reachable for non-instant credit transfers and (iii) through all the same payment initiation channels as the ones available for non-instant credit transfers (for instance, banking web application, mobile app but also, where relevant, in paper format or even at physical desks).
When?
The possibility to make instant payments must be available every day, at any time (24/7).
Verification of the payee’s details
Before executing the payment, the PSP of the payer will have to check the payee’s details (see chapter 5 below).
At what costs?
Instant payments must be provided at the same costs as those applicable to non-instant credit transfers. PSPs cannot differentiate between instant and non-instant payment transfers of corresponding type (e.g. the same payment initiation channel, the same payment instrument used to initiate the payment, customer status or additional services/features). This rule applies to instant payments for both consumers and business customers.
Other modalities
Clients will be, at their sole discretion, able to set a maximum amount limit per day or per transaction for instant credit transfers. The concerned user is informed on the excess and how to modify the limit.
Moreover, clients must have the possibility to submit multiple instant payment orders as a package.
The obligation to check the payee’s details
Another important feature introduced by the Instant Payment Regulation is the obligation for PSPs to offer their clients a service ensuring verification of the payee to whom they intend to send a credit transfer (the so-called “service ensuring verification”).
In practice, the service ensuring verification will work as follows:
- the payer inserts the payee’s name and IBAN in his/her payment order;
- before executing the payment order, the payer’s PSP requests the payee’s PSP to verify whether the payee’s name and IBAN match;
- depending on the outcome of the verification of the payee’s PSP, the payer’s PSP will notify the payer whether:
- there is a match, and the payment order is executed; or
- there is no match and authorising such a payment order (still possible) might lead to transferring the funds to a payment account not held by the payee indicated by the payer; or
- there is an almost match and the payer’s PSP provides the payer with the name of the payee associated with the indicated IBAN.
- Clients must be offered the service ensuring verification for all credit transfers (instant payments and non-instant payments).
When can the effects of the Instant Payment Regulation be expected?
The Instant Payment Regulation established different timing for its application.
PSUs using banks established in the eurozone will have to wait until 9 October 2025 to receive and send Instant Payments (including the service ensuring verification) without having to pay any extra costs. For PSUs using electronic money and payment institutions established in the eurozone, they will be able to receive and send Instant Payments (including the service ensuring verification) without having to pay any extra costs as of 9 April 2027.
Last, for PSUs using PSPs established outside the eurozone, they will be able to receive and send Instant Payments (including the service ensuring verification) without having to pay any extra costs:
- by 9 April 2027, if they are using banks.
- by 9 July 2027, if they are using electronic money and payment institutions.
Esra Güler
Joan Carette
