November 2017 marked a turning point for the European banking industry with the introduction by EBA Clearing sas of legislation regulating instant credit transfers. With the subsequent regulatory introduction, the aim is to significantly improve the speed and security of payments, so that both individuals and companies can transfer money from one account to another immediately and continuously.
Operation of instant credit transfers
According to European regulations, instant credit transfers can be made in all countries belonging to the SEPA (Single Euro Payments Area). This area includes not only EU Member States (including those that do not adopt the euro), but also non-EU countries that are members of the European Economic Area (Iceland, Norway and Liechtenstein) and the nine non-EU countries that make payments in euro (including the United Kingdom, San Marino and Switzerland). A further main requirement for carrying out the transaction is that the sum of money must be present in its entirety in the current account, on panalty of nullity.
Since July 2019, the upper limit for these transfers has been increased to EUR 100,000, offering more flexibility especially for corporate transactions. However, this limit does not apply to payment service providers. An important aspect, which in turn represents a risk in making instant transfers, is that they are not revocable, except in cases of technical problems, duplicate envy or fraud.
Instant transfer in 10 seconds
Despite the innovation, at the beginning of 2022 only 11% of bank transfers were executed in seconds, partly due to fee variations between EU countries. To address this challenge, in October 2022, the European Commission proposed to make instant euro payments accessible to all bank account holders in the EU and EEA countries.
This move was further strengthened in November 2023 when the European Parliament expanded its proposal to reduce costs for businesses and increase the efficiency and competitiveness of EU payment systems. The salient points of the proposal are:
– the instant credit transfer must always be executed within 10 seconds and the payer must receive the relevant invoice within the same time frame;
– in the case of non-euro payments, a payment service provider must immediately convert the amount of the transaction;
– payment service providers must have robust and up-to-date fraud detection systems (including verification of the payee’s identity at no extra cost) and measures to prevent criminal activities;
– no additional costs should be charged for instant payments compared to traditional euro transactions.
This proposal, spearheaded by Michiel Hoogeveen (ECR, Netherlands), won the approval of the Parliament plenary and the Council. In fact, in February 2024, the Parliament adopted these measures in the payment system, setting a 12-month deadline for Member States to adapt. The Council also specified that the implementation of these regulations will take place separately between eurozone and non-eurozone countries. More specifically, it is envisaged that: initially, payment service operators outside the euro area will operate only during office hours, and then gradually align to the common rules.
Conclusion
The recent adoption of regulatory measures by the European Parliament to promote and implement instant payments is a significant step towards the harmonisation and modernisation of payment systems within the European Union and the European Economic Area. Aiming to ensure faster, safer and more cost-efficient transactions, these new regulations reflect a growing commitment to financial innovation and the digitisation of payments. These developments will not only enhance the operational efficiency and competitiveness of European companies, but also encourage greater financial inclusion of citizens.
Sources: https://www.pagamentidigitali.it/ https://www.europarl.europa.eu
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