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Members of the European Parliament have easily voted through their position on the Instant Payments Regulation, as the European Commission has strongly hinted that it would back the Settlement Finality Directive (SFD) being amended in this legislation over the new Payment Services Directive (PSD3).
Members of the influential Economic and Monetary Affairs (ECON) committee have voted on new rules to secure immediate arrival of transferred funds to bank accounts of retail customers and businesses in the EU.
The text was adopted with 49 votes in favour, two against and two abstentions.
This means that the ECON committee negotiators are now ready to start talks with the Council, which has already adopted its position.
"Instant payments are a much-needed innovation. Why does my order from Amazon reach me faster than a payment from a friend in another eurozone country reaches my bank account?” commented Michiel Hoogeveen, parliamentary rapporteur.
Hoogeveen, a Dutch MEP, continued that the Instant Payments Regulation will provide consumers and businesses with the necessary guarantee for payments.
“Yesterday’s vote in the European Parliament to update the Single Euro Payments Area (SEPA) legislation is a significant step towards finalising legislation on instant payments for customers in the EU and EEA,” commented Craig Ramsey, head of real time payments at ACI Worldwide.
According to Ramsey, the vote is a watershed moment for the payments sector in Europe and will lessen fragmentation, increase consumer security and boost the competitiveness of the region’s payments sector, particularly in the wake of FedNow’s launch in the US.
“The vote starts the countdown clock for payment service providers to ready themselves to provide the secure and safe provision of instant payments,” he said.
“And while the legislation has been anticipated for some time, many banks have been slow to make the changes required and will now need to accelerate their plans to become compliant ahead of the deadline.”
What do MEPs want?
Among changes suggested, parliamentarians have voted to reopen the Settlement Finality Directive (SFD) to allow non-bank payment service providers and e-money institutions direct access to the SEPA settlement system.
“This extends the scope of the regulation on immediate payments and adapts it to the digital age. I am excited about the implications, as it levels the playing field for European businesses and fosters innovation,” said Hoogeveen.
The European Commission also confirmed on June 28 that it will be amending the SFD using the third iteration of the Payment Services Directive (PSD3).
Payments insiders in the EU have suggested that the ECON committee are likely to want SFD amendments to remain on the table for the Instant Payments Regulation as the legislation is due to be signed off by the EU’s institutions by the end of this year.
In comparison, PSD3 will take much longer to negotiate considering it has only just been proposed and there are parliamentary elections taking place next year.
When asked by VIXIO during an event, the commission’s Eric Ducolombier restated that the financial services unit is in favour of the SFD being amended.
“The reason why we had not put it in the instant payments proposal was because it is not an instant payment specific issue,” he explained during ESBG Spotlight: Payments, Digital Euro and Open Finance, an event organised by the WSBI-ESBG lobbying group.
The European Commission’s intention was always to put it in PSD3, he said.
“Let’s see what the Council say, I know some member states had expressed interest,” he said. “It is not in the Council amendments so let’s see whether this agreement comes out of the future trilogues.”
If it does, Ducolombier said he is “pretty sure” that the commission will be in favour of this happening.
“This will come sooner, as we are already at the end of the instant payment negotiations, whereas with PSD, it hasn’t started.”
Among other things, MEPs have also said that charges applied by a payment service provider (PSP) on payers and payees in respect of instant credit transfer transactions in euro cannot be higher than the charges applied to credit transfer transactions in euro.
MEPs clarified that PSPs are not allowed to raise, directly or indirectly, the charges for regular transactions to circumvent this rule.
Further, MEPs have said that PSPs should have in place robust and up-to-date fraud detection and prevention measures, flexible enough to deal with new challenges.
To this end, the text says that PSPs operating in the EU should immediately and without any additional charges or fees, provide a service to verify whether there is any discrepancy between the payment account identifier of the payee and the name of the payee provided by the payer.
Where a discrepancy is detected, a client should be notified, and where such information is not provided, a client will need to be compensated by the PSP for any financial damage.
As an additional safeguard against fraud, MEPs have said that PSPs should allow their clients to set a maximum amount for instant credit transfers in euro, which can be easily modified prior to the next transfer.
Moreover, PSPs offering instant credit transfers should verify whether any of their clients are subject to sanctions or other restrictive measures related to the prevention of money laundering and terrorist financing.
Trilogues with the Council are tipped to start on July 19. It is thought that negotiators for the Council want longer implementation deadlines, as well as exemptions for certain channels.
