Avoid Unwelcome Surprises and Prepare for the Next Step in Payments Regulation

The European Union Instant Payments Regulation (IPR) comes into full force later this year.  What will this mean for corporate treasurers in the region and how can they best prepare? Here, in the first of a series of TMI guest columns written by leading experts at European banking group ING, Annelinda Koldewe, Global Head of Payments and Cash Management, explains why “creative thinking, careful planning, and close collaboration with banking partners” is essential.

Instant payments have been around for several years, but with the European Union Instant Payments Regulation (IPR), all payment providers in SEPA must offer users the ability to send and receive via SEPA Instant Credit Transfer (SCT Inst). This means the cross-border payments must be executed within 10 seconds, 24/7, accelerating the adoption of virtually real-time settlements across the EU and EEA.

This has been the norm in several eurozone countries, as well as in the UK and Hungary, for some time. Interesting use cases from these countries show how real-time payments can optimise corporate business processes, as outlined by two of my ING colleagues in an article for TMI in January 2023.

However, the introduction and further implementation of instant payments have increased fraud-related risks. To mitigate this risk, Verification of Payee (VoP) will be mandatory from October 2025. This means every bank must confirm whether the combination of bank account and beneficiary name matches before a transaction takes place, thus preventing fraudulent transactions.

I expect large-scale adoption of this feature by corporate treasurers to reduce the risk of invoice fraud, potentially even during the contracting phase with new suppliers. Instant payments, combined with modern technology such as APIs and AI, bring real-time treasury scenarios closer to actuality.

Creating capacity, embracing technology

Recently, an aviation client based in the Netherlands reached out to ING to create a solution enabling it to track incoming transactions in near real-time, in an automated fashion, and with zero human intervention. We worked closely with the client’s team to create an API that pulls the latest transaction data into the client’s systems. This freed up considerable capacity for the team, and meant it could handle transactions 24/7. This example shows how the implementation of automation, API technology, and AI solutions in transaction banking will help us move to real-time treasury.

The broader impact on real-time treasury processes remains to be seen. Will we see a change in payment behaviour, such as the long-term practice of settling invoices in the morning and managing excess liquidity in the afternoon? What about liquidity management at weekends, and cross-currency payments spanning different time zones?

In Europe, a voluntary scheme has been launched to facilitate cross-border SEPA payments into Europe in real-time through the SEPA One-Leg Out (OLO) scheme. As banks adopt this initiative, which stipulates that at least one of the two legs is denominated in euros, instant payments between other parts of the world and the SEPA region will become possible. Looking into the future, and beyond the SEPA borders, improving speed, transparency, and costs for all payments is a goal set by the G20 countries to be implemented by 2027.

Creating unique opportunities arising from regulation and technical innovation for business and treasury processes requires creative thinking, careful planning, and close collaboration with banking partners. If these steps are not executed, corporates risk being faced with unwelcome surprises regarding changes in liquidity patterns due to the impact of real-time payments.