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The European Commission has released a Q&A clarifying the Instant Payments Regulation (IPR), which requires EU payment service providers (PSPs) to offer instant payment services 24/7.
The Q&A aims to ensure consistent and timely implementation by industry and EU authorities, addressing faster processing, fraud risk and compliance costs.
The clarifications, based on two online workshops with EU authorities and stakeholders, are designed to help PSPs transition smoothly to the new requirements and to provide seamless, round-the-clock payment services.
How does the IPR change things?
The European Commission has released an 82-page set of clarifications. The clarifications focus on a variety of topics, revealing that despite the fact it is a relatively short legislative document, the IPR will still mean plenty of changes for those that are in scope.
The IPR is intended to enable transfers within ten seconds at any time, including outside business hours, between any EU member states and even non-EU entities.
PSPs will need to offer instant euro payments, with fees no higher than those for standard credit transfers.
The extent of the change required will vary throughout the EU, considering some member states such as Belgium and the Netherlands largely charge similar prices for both, while countries such as Italy tend to see PSPs charge more for instant transfers.
Excitingly for payment and e-money institutions, the IPR will also mean that they can gain access to payment systems as a result of an amendment to the Settlement Finality Directive (SFD). This is seen as a big opportunity by many in the payments space, offering enhanced competition and meaning that PSPs can finally cut out the middle man that comes with partnering with a bank.
Key considerations
The IPR requirements vary for different players, and there are plenty of deadlines to take note of for credit, e-money and payment institutions across the EU.
- Eurozone-based PSPs, excluding e-money and payment institutions, must start receiving instant credit transfers by January 9, 2025, and sending them by October 9, 2025.
- Eurozone e-money and payment institutions must both receive and send instant credit transfers by April 9, 2027.
- Non-eurozone-based PSPs, excluding e-money and payment institutions, must begin receiving instant credit transfers by January 9, 2027, and sending them by July 9, 2027.
- Non-eurozone-based e-money and payment institutions have to start receiving instant credit transfers by April 9, 2027, and sending them by July 9, 2027.
There are other deadlines to keep in mind as well. For example:
- All PSPs, including e-money and payment institutions, must comply with new sanctions screening obligations by January 9, 2025.
- Eurozone PSPs must meet the verification of payee (VoP) deadline by October 9, 2025, while non-eurozone PSPs have until July 9, 2027.
- EU member states must transpose SFD-related requirements into national law by April 9, 2025. PSPs in non-eurozone member states are not required to offer instant euro credit transfers from national currency accounts until June 9, 2028, if they do not send or receive non-instant euro credit transfers.
Why should you care?
The EU is hyper-focused on strategic autonomy, and this priority is not going anywhere with the new mandate.
The IPR is part of this, as bluntly, the EU is keen to reduce its reliance on companies from beyond its borders and it sees building a culture of instant payments, including account-to-account (A2A) and QR code payments, as a way forward.
The IPR will bring opportunities, especially if your firm is a payment or e-money institution, as it means direct access to payment systems is now possible.
If your firm is interested in this, time is of the essence to build a positive relationship with your regulator and begin that dialogue to get approval for direct access.
How central banks manage direct access is currently unknown. The European Central Bank (ECB) has released guidance on this that is relatively high level, saying “the Eurosystem adopts a non-discriminatory, objective and risk based assessment of the criteria that could be defined for access to its payment systems by non-bank PSPs”.
Largely, this is up to member states and it will be interesting to see how standards differ among the central banks of the bloc as they transpose the requirements into national law. It is not hard to see more conservative approaches being taken by some central banks, such as the National Bank of Belgium and De Nederlandsche Bank, in comparison to more willing central banks such as the Bank of Lithuania, which has already gone some way in granting access via its CENTROlink service.
The ECB’s policy makes it clear that there is no requirement to default to a PSP's home supervisor for direct access, which could help payments and e-money institutions dealing with less enthusiastic competent authorities.
This will not be for every firm, but ultimately, many could benefit from it in terms of reduced costs from having to pay fees to a banking partner.
The regulation does also bring new challenges, not least because it is coming into place at the same time as the Digital Operational Resilience Act (DORA), which has been taking up a lot of compliance teams’ attention in 2024 as they ready themselves for the January 2025 deadline.
Further, if you are a PSP, you may need to invest in sending and receiving instant payments if you have not before, and PSPs that have been doing so will need to balance out their costs between instant and regular credit transfers.
Previously, many PSPs across the EU would add an extra cost to their real-time payments, which is an option rendered impossible by the IPR.
