The Commission will propose EU legislation on cross-border instant payments

In its 2020 strategy for retail payments, the Commission confirmed its objective to drive the full uptake of instant payments in the EU. Between March 10, 2021 and April 7, 2021, the Commission organized a public consultation on its plans to foster pan-European market initiatives based on instant payments. Based on the feedback received, the Commission is expected to publish its legislative proposal before the end of this year.

Issues the initiative aims to address

In the underlying initial impact assessment, the Commission noted the overriding issue that “the basic conditions for the commercial development of innovative cross-border European and pan-European payment products based on instant payments are not ensured”, due to the industry’s partial participation in the self-regulatory effort.

Additionally, the low level of awareness of the benefits of instant payments, concerns about their security, and often high prices can be a major barrier to mass adoption of instant payments by consumers and merchants for their own benefit.

Advantages and disadvantages of legislation

The Commission noted that in the short term, the deployment of instant payments could represent costs for at least some payment service providers, due to the establishment of the systems necessary to be operational 24 hours a day and the development of new products. However, the adoption of instant payment could potentially represent cost savings for merchants in terms of lower prices compared to alternative payment methods, such as cards, or increased bargaining power compared to payment service providers. due to the availability of more options. The Commission has also published a detailed document regarding the current and foreseeable benefits of instant payments.

Possible legislative options

Based on the information available, the proposal should take the form of a regulation, rather than a directive, aims to cover a mix of possible “facilitating” measures promoting the full roll-out of instant payments, and could include any combination of the Next:

  • Effective incentives for payment service providers to offer instant transfers in euros (similar to that adopted in the past in the SEPA Regulation for SEPA credit transfers and direct debits);

  • targeted consumer protection measures;

  • tailored fraud prevention measures;

  • address the issue of fees levied on consumers for instant transfers;

  • explore issues regarding fee structures for payment solutions based on SEPA Instant Transfers at the point of interaction, without prejudice to the application of competition law, also considering license fees and other systems such as possible sources of revenue and the possible need to incentivize merchants/the acquiring side;

  • reconcile instant payments with regulatory compliance obligations, for example related to sanctions screening;

  • ensuring sound liquidity risk mitigation measures, in particular by strengthening the effectiveness of the crisis management framework for financial institutions;

  • ensure transparency and choice of payment options at the point of interaction for merchants and consumers;

  • supporting the interoperability of payment solutions and systems based on SEPA instant credit transfers;

  • support technical standardization led by industry and/or, if necessary, via the European standardization organisations.

Meanwhile in Hungary

The instant payment system is well developed in Hungary. The Hungarian National Bank launched version 1.0 of the instant payment system in 2020, which allowed customers to transfer up to 10 million HUF (24,000 EUR) electronically every day of the year in 5 seconds. In addition, the service allows the beneficiary to initiate transfer orders by providing a so-called secondary account identifier, such as a mobile phone number or an e-mail address.

A new chapter in the development of instant payment system opens as the Hungarian National Bank prepares a new set of regulatory and technological measures to further develop the ecosystem around instant payment, which is expected to boost its use (Instant Payment Scheme 2.0). National Bank’s development concept includes the following elements:

  • all banks will be required to read QR codes and accept payment requests, and a renewed QR code standard with a centrally validated security element will come,

  • a standardized input mode based on NFC and deeplink will be governed by regulations,

  • the maximum limit for instant payment transactions will be raised from HUF 10 million (EUR 24,000) to HUF 30 million (EUR 72,000),

  • the obligation to send positive feedback on the success of transfers, in addition to negative (unsuccessful) messages,

  • a detailed set of brand rules will be established to ensure easy identification and consistent communication of the payment solution based on instant payment,

  • and the introduction of an instant payment-specific chargeback service, and the preparation of a central fraud prevention solution is underway.

Meanwhile in Romania

Instant payments also became a reality in Romania on April 22, 2019. The instant payments system was launched by Transfond, the operator of the Automatic Interbank Payments Clearing House, in collaboration with Romanian credit institutions, the Association Romanian Banks (manager of the National Fund of Payment Schemes) and the National Bank of Romania (Supervisor of Payment Schemes). Instant payments are processed by Transfond, with settlement made by the National Bank of Romania.

Since 2019, the community of Romanian credit institutions that offer instant payments has grown from 2 (two) to 9 (nine) credit institutions. An instant payment can be made in less than 10 seconds between two accounts opened in 2 different credit institutions participating in this payment scheme.

The service is offered to natural or legal persons, holders of bank accounts, for an instant payment amount of less than 50,000 RON (about 10,000 EUR). In Romania, instant payments can be used for urgent money transfers, at any time of the day or night, for fundraising, payment of online suppliers, without providing personal data / card data, the payment of costs, taxes and emergency bank deposits.

Article co-authored by János Bálint.

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