Instant payments

The Eurosystem, recognising the need to increase the speed at which payments are processed, and as part of its role in promoting safe and efficient payments in the European Union, acts as a catalyst in the development of innovative payment solutions such as instant payments in euro. 

The Euro Retail Payments Board (ERPB) has defined instant payments as “electronic retail payment solutions available 24/7/365 and resulting in the immediate or close-to-immediate interbank clearing of the transaction and crediting of the payee’s account with confirmation to the payer (within seconds of payment initiation). This is  irrespective of the underlying payment instrument used and of the underlying arrangements for clearing and settlement.”

Although the existing electronic payment infrastructures enable payers to initiate retail payments at any time, it normally takes one business day for a payment to reach the beneficiary. 

The need to reduce the time required for safe fund transfers has led Payment Service Providers (PSPs) and clearing/settlement infrastructures to develop national instant payment solutions.

Instant payments will dramatically increase the speed at which payments are made and received in euro in the European Union (EU).

Initiatives to enhance instant payments

In order to avoid fragmentation and to achieve a single and competitive market for retail payments in euro, the ERPB and the Eurosystem have developed initiatives to foster instant retail payments in euro.

In order to avoid fragmentation and to achieve a single and competitive market for retail payments in euro, the ERPB and the Eurosystem have developed initiatives to foster instant retail payments in euro.

According to the European approach, instant payment solutions should consist of layers: the scheme layer, the clearing layer and the settlement layer. 

Scheme

  • Credit transfer scheme
  • Direct debit transfer scheme
  • National and International Card Schemes

Clearing

  • Automated clearing houses (ACHs)
  • Bilateral or multilateral clearing
  • Interbank clearing 

Settlement

  • Real Time Gross Settlement Systems
  • Deferred Net Settlement Systems

Instant payment scheme

In Europe, alongside national instant payment solutions, including mobile payments, the work towards a pan-European scheme for instant payments in euro has focused on the Single European Payments Area (SEPA).  

In Europe, alongside national instant payment solutions, including mobile payments, the work towards a pan-European scheme for instant payments in euro has focused on the Single European Payments Area (SEPA).  

The design and implementation of the new scheme has required and ensured pan-European reachability and interoperability among PSPs. 

Against this background and following the approval of the ERPB, the European Payments Council (EPC), representing Payments Service Providers (PSPs) announced the beginning of the PSPs' voluntary SEPA Instant Credit Transfer (SCTInst) adherence process.

A set of rules “SEPA Instant Credit Transfer Rulebook V.1.0” was issued on 30 November 2016 and entered into force on 21 November 2017. 

The main difference between regular SEPA credit transfers (SCTs) and SEPA Instant credit transfers (SCTInst) is that SCTs are currently processed in batches submitted for intraday clearing and settlement, whereas SCTInst will be processed at a transaction level, in real time on any given day, within a few seconds (24/7/365).  

The key features of the SCTinst scheme are summarised below:

  • Within a maximum of 10 seconds, the money will be available in the account of the beneficiary of the payment;
  • Credit transfers up to €15,000 can initially be processed (unless otherwise agreed between SCTInst scheme participants);
  • SCTInst transactions will be available on a 24/7/365 basis;
  • Potential scope of the 36 European SEPA countries.

Instant payments clearing/settlement infrastructures

In order to support the payments market, the Eurosystem has publicly and clearly expressed its expectation regarding the requirements that instant payments clearing infrastructures must possess in order to be able to support at least one pan-European instant payments solution in euro by November 2017 (ECB Press release). 
In order to support the payments market, the Eurosystem has publicly and clearly expressed its expectation regarding the requirements that instant payments clearing infrastructures must possess in order to be able to support at least one pan-European instant payments solution in euro by November 2017 (ECB Press release). In agreement with them, it set the specific requirements that concern the common access policy of infrastructures vis-à-vis both PSPs and other infrastructures, the harmonised technical and operational interoperability according to the Regulation (ΕU) 260/2012, as well as the single risk mitigation model.   

Instant payments settlement infrastructures

Meanwhile, in November 2018 the Eurosystem decided to develop and offer the necessary settlement service TARGET Instant Payment Settlement (TIPS)
Meanwhile, in November 2018 the Eurosystem decided to develop and offer the necessary settlement service TARGET Instant Payment Settlement (TIPS), in order for the instant payments to be settled in real time and in central bank money, in parallel to payments system TARGET2. 

Benefits of instant payments

Apart from being beneficial to users (payers and payees) due to 24/7/365 availability and immediate transfer of funds, instant payments offer a number of other benefits that are linked to the further integration of the financial markets and the economic rationale for providers, as outlined below:

Apart from being beneficial to users (payers and payees) due to 24/7/365 availability and immediate transfer of funds, instant payments offer a number of other benefits that are linked to the further integration of the financial markets and the economic rationale for providers, as outlined below: 

Consumers:

  • Optimise cash usage
  • Offer increased flexibility and convenience (either regular or extraordinary)
  • Enable immediate person-to-person (P2P) mobile payments
  • Facilitate future innovative payment products via smart devices, e.g. wearables

Public Administration/Enterprises:

  • Increase efficiency of tax and other government-related payments
  • Reduce late payments
  • Promote e-invoicing and payment of invoices
  • Reduce financial risk from unpaid goods and services
  • Optimise working capital management and minimise need for financing

Payments Service Providers:

  • Leverage for new business opportunities through the provision of value-added services
  • Enhancement of their role in the payments market
  • Strengthen the relationship with current customers and promote new customer acquisition and subsequent retention

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