Potential Changes to the European Instant Credit Transfer Rules Explained

On March 2, 2023, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) published a draft report on proposed changes to the rules governing instant credit transfers in euros. While this development is just the beginning of a long legislative process, it marks a significant step toward a more efficient, resilient, and future-ready real-time payment system in Europe.

In this article, we share the key findings deriving from a thorough analysis of the 18-page draft report, explore the potential changes that this document could lead to, and explain how they could impact businesses and individuals across the EU.

Why Is There a Need to Amend Instant Euro Transfer Regulations?

Before we dive into dissecting the contents of the draft report itself, let’s take a minute to understand why the adjustments to the European instant transfer regulatory framework are necessary in the first place. The key reasons that call for such actions include the following:

1. The Need for Up-to-Date Solutions

The current rules governing instant payments in the EU, known as the SEPA Instant Credit Transfer (SCT Inst) scheme, have been in place since 2017. Since then, there have been significant technological advancements in the payments landscape and shifts in the needs of consumers, businesses, and financial institutions.

Therefore, the SCT Inst scheme no longer provides sufficient protection against fraud and cannot ensure a level playing field for payment service providers, which ultimately leads to market fragmentation and hinders innovation.

2. The Desire to Promote the Use of RTPs Across Europe

In the draft report, the rapporteur Michiel Hoogeveen states that despite the widespread use of instant payments in certain EU Member States, only 11% of credit transfers in the EU were conducted through instant payments by the end of 2021. As a result, the rapporteur believes that a legislative proposal is necessary.

3. An Effort to Boost Cross-Border Interoperability

The amendments also aim to align the EU's instant payment system with international standards and best practices. They are designed to promote interoperability and compatibility with other payment systems across the globe, which will facilitate cross-border transactions and promote competition.

4. An Initiative to Support the Adoption of Digital Payments

Finally, the changes in the rules regarding instant payments in euros are intended to support the EU's broader digital agenda and promote the use of electronic payments. This shift was previously accelerated by the COVID-19 pandemic, so a new regulatory framework is set to solidify the progress made and set the stage for further developments in this field.

The Draft Report Overview: What Are the Key Takeaways from It?

The draft report contributes to the progression of the new regulatory initiative by discussing such key topics as:

• The use of instant credit transfers in the euro area. The draft report highlights that instant credit transfers have become increasingly popular in recent years due to their speed and convenience. Thus, the proposed changes should be able to further promote the use of real-time transfers by making them more accessible and affordable.
• Concerns about the cost of instant credit transfers. The report notes that the cost of instant credit transfers can be a barrier to their wider adoption, particularly for small and medium-sized enterprises (SMEs) and consumers. The document states that the proposed changes must address this by capping the fees that can be charged for instant transfers.
• Measures to enhance the security and efficiency of RTPs. The document mentions that instant transfers are vulnerable to security threats and lack efficiency, so the proposed changes should aim to resolve these issues. For instance, PSPs can be required to provide extra information to ensure that transfers are properly authenticated and processed quickly.
• Implications for payment service providers and other stakeholders. The draft report reflects on the fact that the proposed changes may have implications for PSPs, SMEs, and consumers. While PSPs will need to adapt their systems to comply with the proposed changes, SMEs and consumers may need to adjust to new pricing structures for instant credit transfers.

By raising these topics, the draft report is working toward the goal of bringing critical questions to the attention of key authorities and developing solutions that would benefit all the stakeholders involved in the initiative.

Next Steps of the Legislative Process on Instant Euro Transfers

The draft report with the amendment recommendations to the current regulations on instant credit transfers in euros will now undergo further review and discussion by ECON. During this process, proposed changes to the content of the report will be presented and debated among the committee members. This procedure is scheduled to take place already in June 2023.

Once the amendments are presented and debated, the ECON Committee Members will cast votes on the matter in June or early July. If the draft report is approved by ECON, it will be presented for endorsement to the full European Parliament during a plenary session.

Should the report be endorsed, discussions with the Council of the European Union on the final form of the legislation are expected to begin immediately.

Overall, it is clear that the European Parliament's position during the interinstitutional negotiations with the EU Council will be based on the amendments adopted in ECON in June 2023. This means that the initiative for developing an updated framework for instant credit transfers in euros is picking up the pace and entering a decisive step in its legislative process - stay tuned for more updates!