Instant payments

Instant payments will dramatically increase the speed at which payments are made and received in euro in the European Union. Today it normally takes one business day for a payment to reach the beneficiary. With instant payments this will happen in real time, 24 hours a day, 365 days a year. The funds will be available immediately for use by the recipient.

The Euro Retail Payments Board (ERPB) has defined instant payments as "electronic retail payment solutions available 24/7/365 and resulting in the immediate or close-to-immediate interbank clearing of the transaction and crediting of the payee’s account with confirmation to the payer (within seconds of payment initiation). This is irrespective of the underlying payment instrument used (credit transfer, direct debit or payment card) and of the underlying arrangements for clearing (whether bilateral interbank clearing or clearing via infrastructures) and settlement (e.g. with guarantees or in real time) that make this possible."

The benefits of instant payments

It is broadly acknowledged that instant payments are beneficial to users, who need or expect them to be immediately available, just like instant communication.There also seems to be an economic rationale for providers to offer instant payment solutions. The main benefits of instant payments, both to user groups and payment service providers, are outlined below:

For consumers
  • Make and receive payments 24/7/365 with immediate transfer of funds
  • Optimise cash usage with increased flexibility and convenience
  • Enable immediate person-2-person mobile payments
  • Provide for emergency payments at any time
  • Facilitate future innovative payment products via smart devices
For businesses / governments
  • Make and receive payments 24/7/365 with immediate transfer of funds
  • Improve cash flow and process of payment reconciliation
  • Increase efficiency of e-invoicing and e-billing
  • Optimise working capital management and minimise need for external financing
  • Reduce late payments and speed up the payment of invoices
  • Improve e-commerce, with goods/services released against concomitant payment, thus decreasing the financial risk
  • Speed up check-out processes at a physical point-of-sale
  • Increase efficiency of and integrate tax, social insurance or other government-related payments
For payment service providers
  • Leverage for new business opportunities (e.g. through value-added product offerings to consumers, corporates and merchants)
  • Strengthen the relationship with current customers
  • Promote new customer acquisition and subsequent retention
  • Provide a competitive advantage in the market place
  • Future-proof core infrastructure

The European Approach

The ERPB has proposed that at least one instant payment solution in euro be available to all payment service providers in Europe. At the same time, irrespective of the payment instrument on which they are based, multiple instant payment solutions may help achieve the objectives of competition, innovation and integration in this market segment, provided that they allow for pan-European reachability. For these purposes, it is expected that solutions be developed at the pan-European level or, if developed at the national level, that they become mutually interoperable at least with solutions based on the same payment instrument.

To avoid fragmentation, instant payment solutions should consist of layers:

  • Scheme layer: end-user solutions cooperatively or competitively developed on the market (e.g. for person-to-person mobile payments) and underlying payment schemes
  • Clearing layer: arrangements for clearing of transactions between payment service providers
  • Settlement layer: arrangements for settlement of transactions between payment service providers

To speed up the development and roll-out of instant payments for Europe, the ERPB has invited the European Payments Council (EPC) to develop a pan-European instant payment scheme. The scheme will be based on the EPC’s current SEPA credit transfer (SCT) scheme and will be called SCT inst.

The Eurosystem is fostering work and dialogue with the industry so that the clearing and settlement layers can support SCT inst. The Eurosystem has defined a specific set of expectations for infrastructures offering clearing services for pan-European instant payments in euro.

Eurosystem expectations for instant clearing infrastructures

Current status

In November 2015 the ERPB endorsed the general scheme design proposal presented by the EPC. On this basis, the SCTinst scheme is expected to be developed by November 2016 and implemented by November 2017. More information can be found in the statement following the ERPB meeting held on 27 November 2015.