The European Commission’s Instant Payments proposal – the Tink take

3 min read|Published October 28, 2022
The European Commission’s Instant Payments proposal – the Tink take

The European Commission published its proposal on Instant Payments on 26 October. This new legislative proposal ensures that instant payments become ubiquitous in the payments ecosystem – clearing the way for widespread adoption of open banking payments across all B2C use cases.

TL;DR – Quick summary
  • The European Commission has published its proposal on Instant Payments.

  • This clears the way for widespread adoption of Pay by Bank for ecommerce and allows merchants to benefit from instant funds settlement – a significant upgrade on most other payment methods.

  • The timelines for implementation are perhaps longer than necessary and at Tink, we are hoping for more rapid adoption.

TL;DR – Quick summary
  • The European Commission has published its proposal on Instant Payments.

  • This clears the way for widespread adoption of Pay by Bank for ecommerce and allows merchants to benefit from instant funds settlement – a significant upgrade on most other payment methods.

  • The timelines for implementation are perhaps longer than necessary and at Tink, we are hoping for more rapid adoption.

So what are the key points of the European Commission’s proposal and what does it mean for the payments ecosystem? 

Here’s what it means 

  • All account servicing payment service providers (‘ASPSPs’ or simply #banks) that can send and receive credit transfers must offer an ‘instant’ alternative (PIs and EMIs are excluded due to their limited access to payment systems).

  • Receiving instant payments needs to be implemented within six months of the regulation being adopted, sending within 12 months (where the latter is required for instant retail payments).

  • Charges can’t be higher than for non-instant credit transfers (i.e. free where SCT or domestic transfers are free as well, which applies in almost all situations).

  • Banks have to help prevent payments going missing, by alerting the user to any discrepancies between beneficiary IBAN and beneficiary name before completing initiation (unless users have opted out of this service).

  • Sender and receiver banks shall do sanction checks at least daily, but not as part of an instant payment itself.

The Tink take

  • For open banking payments, the mandatory adoption of instant payments allows us to give merchants instant confirmation and verification that the transaction has been executed and settled – clearing the way to wider adoption of ‘Pay by Bank’ for ecommerce.

  • Merchants benefit from instant funds settlement – a significant upgrade on most other payment methods.

  • The timelines for implementation are perhaps longer than necessary. Most banks can already receive and send instant payments through TIPS and RT1 interbank infrastructure – so we are hoping for more rapid adoption.

  • We like the requirement for banks to monitor customers – not transactions – against sanction lists, helping to keep the payments ecosystem safe. 

  • In principle, forcing use of confirmation of payee (‘CoP’) attaching the name and IBAN of the payee against a central directory, could help address financial crime – but uncontrolled adoption of CoP could create unwanted friction for users across channels. Alternatively, the use of transaction risk indicators could help banks meet their CoP obligations without impacting the user experience.

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