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Will ten seconds-money transfers be the real new normal?

Soon, banks in Europe and beyond must be able to send and receive instant payments (SEPA Instant Credit Transfers). The recipient account must accept the amount within a maximum execution time of ten seconds. The prices for instant payments must be adjusted to those of conventional transfers in euros for all customers. To prevent fraud and incorrect transfers in the future, banks will be obliged to carry out a matching check to verify the recipient's identity. The text, already agreed with EU member states, updates the current Single Euro Payments Area (SEPA) rules and should be published in the Official Journal soon.

The new regulation sets the rules for creating pan-European solutions for retail payments at the POI, namely at the physical point of sale and in the mobile and e-commerce space, governed at the European level. There is currently no European solution for POI payments, nor a pan-European scheme for those use cases, and there is a strong reliance on international card schemes and – for e-commerce – on global big tech providers. Digital wallets are becoming more popular and face similar shortcomings.

Against this background, the Instant Payments Regulation (IPR) intends to fill these gaps and introduce the following obligations:

Mandatory participation in the SCTInst for all banks that offer euro transfers:

Banks offering a payment service of sending and receiving credit transfers shall provide to all their clients a payment service of sending and receiving instant credit transfers and ensuring that all payment accounts that are reachable for
credit transfers are also reachable for instant credit transfers 24 hours a day
and on any calendar day.

Instant payments must be possible via all the interfaces where standard credit transfers are also possible, which means that banks must execute these transactions regardless of the payments initiation channels, which can also include ATMs, online banking, mobile banking applications, or in any other way on the premises of the payment service providers (PSPs).

Therefore, the main challenge will be executing non-electronic payment orders and bulk payments. As banks will have to, within ten seconds from the time of r ceipt of the payment order, make the amount of the payment transaction available to the client and confirm the completion of the transaction to the payer's PSP, which will have to inform the payer of the transfer free of charge.

Price regulation – the price for an instant payment should be the same as for a standard (SEPA) credit transfer:

The fees charged PSPs for sending or receiving Euro instant payments should not be higher than the exact fees for sending or receiving a traditional transfer in Euros. These provisions will apply 9 months after the Regulation's entry
into force
and for payment service providers outside the euro area 33 months after entry into force.

Beneficiary Name Check (Confirmation of Payee):

All PSPs that offer the sending of instant payments must provide their retail and corporate clients with a service that checks whether the payee's IBAN matches the payee's name and inform the customer of any discrepancy detected. The payer's PSP shall perform that service immediately after the payer provides relevant information about the payee and before the payer is offered the possibility to authorize that credit transfer.   The user is free to decide whether to issue the payment order or not – regardless of the outcome of the check. According to the latest legal text, banks can provide corporate clients only the means to opt out from receiving the service when submitting multiple payment orders as a package. These rules will apply 18 months after the Regulation's entry into force and for payment service providers outside the euro area 39 months after entry into force.

If a PSP does not fulfil its fraud prevention duties and this results in financial damage, a client may demand to be compensated by the service provider, according to the new rules.

Checking of EU sanctions lists only once a day instead of before each transaction:

Payment service providers must check at least once a day whether any of their customers is included in the list of persons or organizations subject to EU sanctions provided by the EU Commission. This check must also be carried out immediately after the entry into force of any new or amended restrictive measures.

It applies to PSPs in and outside the euro area, 9 months after the Regulation's entry into force.  There are also high penalties for non-compliance with audit requirements (at least 10% of last year's net turnover for legal entities and up to EUR 5 million for natural persons).

The most challenging expectations the Regulation poses will be executing payment orders via offline channels. Matching the beneficiary's name via offline channels represents a burden as it would entail cases whereby orders are initiated via ATMs. In this last case, banks must perform the service at the time of receipt of the payment order.

Stakeholders in the market have raised numerous queries regarding the interpretation of various provisions within the Regulation. DG FISMA will address these inquiries to provide necessary clarifications in preparation for the imminent implementation of the Regulation. In the upcoming weeks, DG FISMA will issue an invitation to submit questions and, based on that input, work on a Frequently Asked Questions (FAQ) document.  

For inquiries please contact:

RBI Regulatory Advisory

Raiffeisen Bank International AG | Member of RBI Group | Am Stadtpark 9, 1030 Vienna, Austria  | Tel: +43 1 71707 - 5923