Commission to propose EU-wide legislation on cross-border instant payments

In its 2020 Retail Payments Strategy, the Commission confirmed its goal of fostering the full take up of instant payments in the EU. Between 10 March 2021 and 7 April 2021, the Commission held 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.

Problems the initiative aims to tackle

In the underlying inception impact assessment, the Commission noted the overarching problem that “the basic conditions for the commercial development of innovative European and pan-European cross-border payment products based on instant payments have not been secured”, as a result of the partial industry participation in the self-regulatory effort.

Moreover, low level of awareness of the advantages of instant payments, concerns over their safety and often premium pricing may constitute major hurdle to the mass uptake of instant payments by consumers and merchants to their own benefit.

Pros and cons of the 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 putting in place systems necessary to be operational round the clock and to developing new products. However, the uptake of instant payment could potentially represent a cost saving for merchants in terms of lower pricing compared to alternative payment methods, such as cards, or increased bargaining power in relation to payment service providers due to the availability of more options. The Commission also published a detailed document concerning the current and foreseeable benefits of instant payments.

Possible legislative options

Based on the available information, the proposal is to take the form of a regulation, rather than a directive, aims to cover a mixture of possible ‘enabling’ measures fostering the full roll-out of instant payments, and could include any combination of the following:

• Effective incentives for payment service providers to offer instant credit transfers in euro (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;
• addressing the issue of charges levied on consumers for instant credit transfers;
• exploring issues regarding fee structures for SEPA Instant Credit Transfer-based payment solutions at point of interaction, without prejudice to competition law enforcement, also considering licensing and other scheme fees as possible sources of revenue and the possible need to incentivise merchants/the acquiring side;
• reconciling instant payments with regulatory compliance obligations, for example related to sanctions screening;
• ensuring sound mitigation measures on the liquidity risk, including by enhancing the effectiveness of the crisis management framework for financial institutions;
• ensuring transparency and choice of payment options at the Point of Interaction for both merchants and consumers;
• supporting interoperability of SEPA Instant Credit Transfer-based payment solutions and schemes;
• supporting technical standardisation led by industry and/or, if necessary, via European standardisation organisations.

Meanwhile in Hungary

The instant payment scheme is well developed in Hungary. The Hungarian National Bank launched the 1.0 version of the instant payment scheme in 2020 which allowed customers to transfer up to HUF 10 million (EUR 24 000) through electronic channels every day of the year within 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 e-mail address.

A new chapter in the development of the instant payment scheme is opening as the Hungarian National Bank prepares a new package 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). The National Bank’s development concept includes the following:

• 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 standardised way of data entry based on NFC and deeplink will be ruled by a regulation,
• 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 the negative (unsuccessful) messages,
• a detailed set of branding rules will be established to ensure easy identification and consistent communication of the instant payment-based payment solution,
• 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 have also become reality in Romania on April 22, 2019. The instant payments scheme was launched by Transfond, the operator of the Automatic Interbank Payments Clearing House, in collaboration with Romanian credit institutions, the Romanian Banks Association (manager of the National Payment Schemes) and the National Bank of Romania (Supervisor of Payment Schemes). Instant payments are processed by Transfond, with settlement being 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, participants in this payment scheme.

The service is offered to individuals or legal entities, bank account holders, for a value of an instant payment of less than RON 50,000 (approx. EUR 10,000). In Romania, instant payments can be used for urgent money transfers, at any time of the day or night, for collecting funds, paying online suppliers, without providing personal data/card data, payment of fees, taxes and bank instalments in an emergency regime.

We keep you updated on the developments of these initiatives. Should you need more information on the status of instant payment solutions in different jurisdictions, please turn to our legal experts.

Article co-authored by János Bálint.