What are instant payments?
Instant payments are electronic retail payment solutions that process payments in real time, 24 hours a day, 365 days a year, where the funds are made available immediately for use by the recipient.
How is EU-wide availability ensured?
In December 2014 the Euro Retail Payments Board (ERPB) proposed that at least one pan-European solution for instant payments in euro should be available to all payment service providers in the European Union.
The proposal was made after market participants in several EU countries had implemented or were in the process of developing national solutions for instant payments. The risk was that these solutions would operate smoothly within the specific country, but would not ensure cross-border availability.
Multiple instant payment solutions may help achieve the objectives of competition, innovation and integration, but only if they each have a pan-European reach. To this end, solutions should either be developed at the pan-European level or, if developed at the national level, be mutually interoperable with other solutions. To avoid any fragmentation and increase competition, instant payment solutions should consist of the following layers:
- end-user solution layer: cooperatively or competitively developed in the market (e.g. for person-to-person mobile payments);
- scheme layer: underlying payment schemes;
- clearing layer: arrangements for the clearing of transactions between payment service providers;
- settlement layer: arrangements for settlement of transactions between payment service providers.
To speed up the development of instant payments in euro, the ERPB invited the European Payments Council (EPC) to develop a pan-European instant payment scheme. The scheme is based on the EPC’s existing SEPA credit transfer (SCT) scheme and is called SEPA Instant Credit Transfer (SCT Inst).
Key features of SCT Inst are that services should be available 24/7/365 and that it should not take more than ten seconds for the recipient’s payment service provider (PSP) to inform the payer’s PSP whether the money has been received or not and, in the case of a successful transaction, to make the funds available to the recipient. The SCT Inst scheme became operational in November 2017.
What is the Eurosystem doing?
Besides the initiative pursued via the ERPB, the Eurosystem is working closely with the industry to ensure that the clearing and settlement layers can support SCT Inst. For example, it has defined a set of expectations for infrastructures offering clearing services for pan-European instant payments in euro and has implemented enhancements in TARGET2 to support the settlement of instant payments cleared by these infrastructures.
Furthermore, to ensure that at least one pan-European instant payment solution exists as proposed by the ERPB, the Eurosystem has decided to develop an instant payment solution called TARGET Instant Payment Settlement (TIPS).