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What You Need To Know About EU Instant Payments

Europe has yet to exploit the full potential of instant payments, but this is set to change. The Eurosystem and the European Commission (EC) are combining forces to remove barriers and make instant payments available to all, opening up new benefits for merchants across the continent.

Payments need to keep pace with an increasingly digital society. In Europe, 90% of people aged 16 to 74 now use the internet and 74% buy or order goods online. In our expanding “always on” transactional world, giving and receiving money electronically should be as instantaneous as handing over cash. Yet, in the EU, only 14% have used instant payments.

Instant payments are predicted to ramp up.

In October 2022, the EC proposed new legislation that would allow citizens holding bank accounts in the European economic area to make instant payments in euro, 24/7/365  — making them more widely available and affordable.

The regulatory push in Europe implies that banks across the Eurozone must comply with a proposed EC law, mandating financial institutions across the Single Euro Payments Area (SEPA) countries to offer instant payments under the SEPA Instant Credit Transfer scheme at the same cost or lower-than-standard credit transfers. The new regulation is aimed at unlocking the benefits of instant payments for European economies.

This momentum aims to increase the number of banks and service providers offering instant transfers and the number of SEPA Instant Credit Transfer transactions settled in Europe. It should also allow consumers to pay quickly and safely online and in-store using the same payment method anywhere in Europe.

The U.K. has also embarked on a modernization journey of its Faster Payments scheme via the New Payments Architecture program. Consequently, more merchants are expected to adopt instant payments and reap the benefits they offer for their businesses and customers.

Only around one in 10 euro credit transfers in the EU are processed as an instant payment — and it’s even lower for cross-border between Member States. Low volumes mean that European businesses and consumers aren’t reaping all the benefits they could. The inability to access instant payments in-store and online also limits choice — especially for those who don’t want to pay using a credit card.

Our Prime Time for Real-Time report highlighting real-time payments globally confirms that Europe has fallen behind the rest of the developing world when it comes to instant payments adoption. Government mandates are rare in the region. However, given that the four largest EU economies are struggling to keep pace with the likes of India and South America, the EC’s motivation for proposing to mandate cheaper, more secure and more accessible real-time payments is clear.

How do we know it will have a positive impact on adoption and use? In countries like the Netherlands, where banks have made real-time payments universally available and free to use, market penetration is already high and is expected to grow rapidly. The same is true in the Nordic countries, where merchant acceptance of in-store and eCommerce scenarios is now widespread.

What opportunities will these drivers bring across the payments landscape?

Globally, instant payments are shown to be a very powerful driver of competition and innovation, and they also open the door to new benefits for EU merchants:

  • Clearing funds immediately gives merchants greater control of cash flow so they can access it and put it to work sooner — restocking, paying suppliers and cutting costs. It’s estimated that instant receipt of funds could help European businesses unlock €1.34 to €1.84 billion each year.
  • Greater payment choices at the checkout could help drive down fees from payment service providers.
  • Merchants will be able to use new digital, affordable and efficient payment solutions to accept payments for their goods and services without incurring interchange fees, which should reduce operational costs.
  • Importantly for eCommerce merchants who rely on fast delivery to be competitive, payment hits their accounts instantly, with no settlement delays or chargebacks. They can safely release goods and services straightaway and offer instant refunds.
  • It’s good news for payments innovation, too. Wider access to instant payments will support the merchant development of new services and use cases for consumers (e.g., instant payouts, top-ups and open banking-enabled payments).
  • By offsetting fees and operational savings, merchants can also afford to fund new loyalty, discount and reward schemes that help boost conversion as the rising cost of living continues to impact EU customer spend.

Working to accelerate adoption.

The EC’s legislative proposal is a very important step forward for the widespread adoption of instant payments within Europe.

The nature of sending and receiving payments requires a significant network of players for a strong solution to take hold.

Rest assured that, as a long-term champion of real-time payments, ACI is ready to go with easy-to-integrate, scalable merchant omnichannel solutions to help European merchants and their customers take advantage of the forward momentum. ACI Instant Pay is a real-time payments solution that enables merchants to accept instant online, mobile and in-store payments via a simple API integration with the ACI Payments Orchestration Platform.

Discover more about how we’re ensuring it’s prime time for European real-time.

Senior Product Manager

Ankit has more than 13 years of experience in driving payments product innovations for banks and merchants globally. As a PM leader with ACI, he focuses on merchant payment innovations — growth and strategy. Ankit has experience building the global real-time payments engine, Request to Pay, as well as working as a bank auditor for statutory audits for banks in India.