Introduction
 

The Commission's proposal aimed to amend and modernize the 2012 SEPA on standard credit transfers in euros, introducing specific provisions for instant credit transfers in euro. This following earlier Council conclusions emphasizing the need for more widespread instant payments and the development of competitive EU-wide payment solutions as at least one-third of PSPs in the Union did not offer instant credit transfers in euro.

The regulation aims to increase the use of euro instant credit transfers, enhancing accessibility for Union consumers and businesses through specified requirements that will be translated into obligations for Payment Service Providers (PSPs) in the EU.

Changes: what to expect?
 

As a number of national regulatory solutions are being adopted or proposed to increase the usage of instant credit transfers in euro, uniform rules for EU and EEA consumers and businesses covering cross-border transfers needed to be introduced. In essence, the proposal brings the following 5 new obligations for PSPs regarding Instant Credit Transfers:

The Council and Parliament agreed on a phased implementation of the new obligations, following a dedicated implementation timeline after the final regulation has been published. They defined a quicker transition period for the obligations in the euro area countries and a more extended implementation timeline in the non-euro area countries (refer to Figure 2 for a visual representation of the timeline).

Impact and practical considerations: how to prepare?
 

The introduction of new regulations triggers several practical considerations:

1. Reevaluating operating models, with the restriction of additional charges and a possible need for a transition to a 24/7 support systems.

This shift might involve revising team structures, working arrangements, and SLAs to accommodate the restriction of charging additional costs for instant payments compare to standard SEPA transfers. Additionally, PSPs must prepare for operational challenges by ensuring 24/7 support for customer queries, addressing liquidity management needs, and implementing change management and training programs to adapt to altered channels, forms, pricing, and processes.

Opportunities broad by the instant payments:

• Operations - reorganization of teams that provide customer support and issue resolutions.
• Compliance - adjust the existing case management process to combine end-of day sanction screening with AML investigation leading to costs benefits upgraded fraud response capabilities.
• Treasury – Liquidity management which is closure to real-time (intra-day) views.
• New beyond banking services accelerated/unlocked by instant payments capabilities.

2. Reevaluating the current methodology for screening instant payments, separating it from transaction screening and shifting to reliance on the subject screening, including that performed by the counterparty PSP.

There is a need to clarify the approach concerning EU sanction screening beyond what is explicitly stated, including the impacts on liability and more specific expectations for the screening process. It will also become even more crucial to establish a fallback process in the event of issues arising during the subject screening process. On top of that, entities need to take into consideration any other screening obligations that are applicable to them outside of the EU sanctions as these are not covered by the Regulation.

3. Business Process Adjustments

Banks must review their weekend and end-of-day processes, ensuring proper value dating aligned with business and calendar days. For example, banks offering SEPA classic on non-EUR currencies must conduct a detailed impact assessment and define new processes to handle real-time FX-based instant payments effectively. A detailed business readiness roadmap will help effective implementation.

4. Technology considerations for banks.

• Real-time fraud monitoring capabilities need to be established across all channels to efficiently detect and prevent fraud before payments settle in real-time. Banks lacking 24/7 core system availability face substantial hurdles in supporting SCT Inst.
• Identity Verification of the Payee, as well as verifying whether PSUs (Payment Service Users) are listed persons or entities requires the banks to maintain and upgrade existing databases and matching systems in the EU utilized for verification of the end-user.
• Regulatory mandates for offering bulk payments prompt challenges, requiring an investigation into existing Payment Engine capabilities. SCT Inst's requirement to be available on all channels may impact assisted channels, necessitating a comprehensive review of the core banking system capabilities to ensure they can handle real-time requests and responses.
• Banks need to review their current architecture and integration patterns to meet scheme SLAs across various integration touchpoints for real-time payment processing.
• Mandatory adoption of Confirmation of Payee (CoP) services requires considerations for impact on channels, integration, and operational processes.
• Any design or work for SCT Inst must consider existing Synch design, as payments will transition from Synch to SCT Inst.