Who doesn’t know the feeling? You transfer money and then wait what feels like forever for it to finally reach the recipient’s account. But this will soon be a thing of the past—thanks to a new EU directive that aims to make payment transactions faster and more efficient for all of us. Banks will be required to comply with these rules, and the best part: instant payments are set to become the standard.
Key Changes at a Glance:
- Mandatory real-time transfers: Starting in January 2025, banks in the Eurozone must be able to receive instant payments, and by October 2025, they must also support sending them.
- IBAN-name check: Before a transfer is executed, the system will verify whether the recipient’s name matches the IBAN, reducing fraud and erroneous transactions.
- No higher fees: Instant payments cannot cost more than traditional transfers.
- Extended deadlines for non-Eurozone countries: Transition periods until 2027 apply for countries outside the Eurozone.
- Technical upgrades: Banks must modernize their IT systems to ensure secure, 24/7 transaction processing.
What’s New?
Up until now, the SEPA area (Single Euro Payments Area) allowed for transfers to take a maximum of one business day. Since the introduction of this rule in 2012, it was a significant improvement over earlier standards. However, times are changing, and in a world where everything moves faster, payment systems sometimes lag behind. To address this, the European Union has taken the next step with Regulation (EU) 2024/886—the introduction of instant payments.
Instant payments enable transfers to be processed in real time. Whether it’s a weekday, weekend, public holiday, or the middle of the night, the money will arrive in the recipient’s account within seconds. As of January 9, 2025, all payment service providers in the Eurozone must at least be capable of receiving such real-time payments. By October 9, 2025, they will also be required to offer instant payment transfers. For countries outside the Eurozone, extended deadlines apply until 2027.
Focus on Security and Costs
In addition to speed, there is another innovation that enhances security: the so-called “IBAN-name check.” Before executing a transfer, the system verifies whether the recipient’s name matches the provided IBAN. This significantly reduces the risk of errors and fraud.
There’s also good news regarding costs: banks are not allowed to charge higher fees for instant payments than for traditional transfers. This makes this innovative payment method not only faster but also affordable.
Challenges for Banks and Service Providers
Of course, the transition to instant payments presents challenges. Banks and payment service providers need to upgrade their IT infrastructure to ensure seamless 24/7 transaction processing. Additionally, the swift processing of payments will only be possible if fraud prevention and sanctions screening processes are adapted accordingly.
A Win for Consumers and Businesses
Despite the challenges, the benefits outweigh the drawbacks: with instant payments, the EU is creating a modern, efficient payment landscape that benefits both consumers and businesses. Whether for online shopping, paying invoices, or transferring salaries—the future of payments will be faster, safer, and more convenient.
Now, it remains to be seen how well implementation works in practice. One thing is certain, though: instant payments represent a significant leap forward, bringing Europe closer to the reality of a seamless digital single market.
Disclaimer: This article was created with support from ChatGPT.