New European Regulation on Instant Payments
New European Regulation on Instant Payments
October 2024
Konstantinos Vouterakos, Senior Partner, and Despina Korovesi, Associate
Kyriakides Georgopoulos Law Firm
Introduction
In 2017, European payment services providers agreed on a framework for instant credit transfers in euro under the auspices of the European Payments Council. Despite their undisputable practicality and their contribution in facilitating transactions, until today, the uptake of instant credit transfers in euro at EU level has not been high enough to meet the real needs of the market. For this reason, it is considered that a widespread and rapid increase in such uptake could unlock the full-scale network effects of instant credit transfers in euro, leading to benefits and economic efficiency gains for payment service users and payment service providers, reduced market concentration, and increased competition and choice of electronic payments, in particular for cross-border transactions.
Currently, at least one third of payment service providers within the EU do not offer the service of instant credit transfers in euro. This is partially a consequence of the lack of uniform set of rules and regulations throughout the EU. For this reason, national competent authorities within the EU have adopted several regulatory solutions:
- to promote the provision of instant credit transfers service;
- to enable the protection of payment service users from sending funds to unintended payees; and
- to specify the compliance obligations that arise from restrictive measures adopted at EU level.
Said national regulations of instant credit transfers set the risk of fragmentation of the internal market rules, which results in significant difficulties in execution of cross-border instant credit transactions, while at the same time increases compliance costs. In that context, on 13 March 2024, the European Parliament and the Council adopted Regulation (EU) 2024/886 amending Regulations (EU) No 260/2012 and (EU) 2021/1230 and Directives 98/26/EC and (EU) 2015/2366 as regards instant credit transfers in euro (the “Regulation”) (text available here). The Regulation has been introduced to provide common rules and requirements on instant credit transfers in euro, including cross-border instant credit transfers. Such common rules will facilitate payment service users in the process of transferring funds within the EU in seconds and round the clock every calendar day.
The Regulation
The Regulation -among various definitions- introduces the notion of “instant credit transfers” in Regulation (EU) No 260/2012, as credit transfers which are executed immediately, 24 hours a day and on any calendar day. Additionally, it regulates that payment service providers that offer to payment service users a payment service of sending and receiving credit transfers shall also offer to all their payment service users a payment service of sending and receiving instant credit transfers. The rationale behind it is to increase the uptake of instant payments in the EU. All payment accounts that are reachable for credit transfers shall also be reachable for instant credit transfers 24 hours a day and on any calendar day. Any charges imposed by payment service providers on payers and payees in respect of sending and receiving instant credit transfers shall not be higher than charges levied for other credit transfers of corresponding type. By way of exception to the above, the service of verification of the payee to whom the payer intends to send a credit transfer shall be provided to all payment service users free of charge. Such a service shall be performed after the payer provides relevant information about the payee and before the payer is offered the possibility of authorizing that credit transfer.
As a preventive measure for the safety of transfer of funds, payment service providers offering instant credit transfers shall verify whether any of their payment service users are persons or entities subject to targeted financial restrictive measures, namely, if an asset freeze is imposed on a person, body or entity or a prohibition on making funds or economic resources available to a person, body or entity, or for its benefit, either directly or indirectly, pursuant to restrictive measures adopted in accordance with Article 215 TFEU. Such verification shall be conducted immediately after the entry into force of any new targeted financial restrictive measures or immediately after the entry into force of any amendments to such targeted financial restrictive measures, and at least once every calendar day.
Member States shall lay down rules on the penalties applicable to infringements on the abovementioned provisions regarding instant credit transfers and shall take all measures necessary to ensure that they are implemented. Such penalties shall be effective, proportionate and dissuasive.
Final Remarks
The Regulation was published on the Official Journal of the European Union on 19 March 2024 and entered into force on 8 April 2024. EU Member States shall apply the above requirements by 9 April 2025.
However, payment service providers would need sufficient time to meet the obligations arising from the Regulation. Therefore, such obligations will be gradually introduced, starting from the service of receiving instant credit transfers, while the service of sending instant credit transfers will follow, as it is more costly and complex.
Conclusively, the Regulation aims at increasing the provision of instant credit transfers service at an EU level, both nationally and on a cross-border basis and, also, creating a uniform set of rules throughout the EU which is a crucial factor for the enhancement of the internal market.
October 2024
Konstantinos Vouterakos, Senior Partner, and Despina Korovesi, Associate
Kyriakides Georgopoulos Law Firm
Introduction
In 2017, European payment services providers agreed on a framework for instant credit transfers in euro under the auspices of the European Payments Council. Despite their undisputable practicality and their contribution in facilitating transactions, until today, the uptake of instant credit transfers in euro at EU level has not been high enough to meet the real needs of the market. For this reason, it is considered that a widespread and rapid increase in such uptake could unlock the full-scale network effects of instant credit transfers in euro, leading to benefits and economic efficiency gains for payment service users and payment service providers, reduced market concentration, and increased competition and choice of electronic payments, in particular for cross-border transactions.
Currently, at least one third of payment service providers within the EU do not offer the service of instant credit transfers in euro. This is partially a consequence of the lack of uniform set of rules and regulations throughout the EU. For this reason, national competent authorities within the EU have adopted several regulatory solutions:
- to promote the provision of instant credit transfers service;
- to enable the protection of payment service users from sending funds to unintended payees; and
- to specify the compliance obligations that arise from restrictive measures adopted at EU level.
Said national regulations of instant credit transfers set the risk of fragmentation of the internal market rules, which results in significant difficulties in execution of cross-border instant credit transactions, while at the same time increases compliance costs. In that context, on 13 March 2024, the European Parliament and the Council adopted Regulation (EU) 2024/886 amending Regulations (EU) No 260/2012 and (EU) 2021/1230 and Directives 98/26/EC and (EU) 2015/2366 as regards instant credit transfers in euro (the “Regulation”) (text available here). The Regulation has been introduced to provide common rules and requirements on instant credit transfers in euro, including cross-border instant credit transfers. Such common rules will facilitate payment service users in the process of transferring funds within the EU in seconds and round the clock every calendar day.
The Regulation
The Regulation -among various definitions- introduces the notion of “instant credit transfers” in Regulation (EU) No 260/2012, as credit transfers which are executed immediately, 24 hours a day and on any calendar day. Additionally, it regulates that payment service providers that offer to payment service users a payment service of sending and receiving credit transfers shall also offer to all their payment service users a payment service of sending and receiving instant credit transfers. The rationale behind it is to increase the uptake of instant payments in the EU. All payment accounts that are reachable for credit transfers shall also be reachable for instant credit transfers 24 hours a day and on any calendar day. Any charges imposed by payment service providers on payers and payees in respect of sending and receiving instant credit transfers shall not be higher than charges levied for other credit transfers of corresponding type. By way of exception to the above, the service of verification of the payee to whom the payer intends to send a credit transfer shall be provided to all payment service users free of charge. Such a service shall be performed after the payer provides relevant information about the payee and before the payer is offered the possibility of authorizing that credit transfer.
As a preventive measure for the safety of transfer of funds, payment service providers offering instant credit transfers shall verify whether any of their payment service users are persons or entities subject to targeted financial restrictive measures, namely, if an asset freeze is imposed on a person, body or entity or a prohibition on making funds or economic resources available to a person, body or entity, or for its benefit, either directly or indirectly, pursuant to restrictive measures adopted in accordance with Article 215 TFEU. Such verification shall be conducted immediately after the entry into force of any new targeted financial restrictive measures or immediately after the entry into force of any amendments to such targeted financial restrictive measures, and at least once every calendar day.
Member States shall lay down rules on the penalties applicable to infringements on the abovementioned provisions regarding instant credit transfers and shall take all measures necessary to ensure that they are implemented. Such penalties shall be effective, proportionate and dissuasive.
Final Remarks
The Regulation was published on the Official Journal of the European Union on 19 March 2024 and entered into force on 8 April 2024. EU Member States shall apply the above requirements by 9 April 2025.
However, payment service providers would need sufficient time to meet the obligations arising from the Regulation. Therefore, such obligations will be gradually introduced, starting from the service of receiving instant credit transfers, while the service of sending instant credit transfers will follow, as it is more costly and complex.
Conclusively, the Regulation aims at increasing the provision of instant credit transfers service at an EU level, both nationally and on a cross-border basis and, also, creating a uniform set of rules throughout the EU which is a crucial factor for the enhancement of the internal market.
