SEPA Instant Credit Transfers

Towards a New European Standard?

The European Instant Payments Regulation (IPR), which came into force a year ago, now requires all payment service providers in the Eurozone of the European Economic Area (EEA) to offer SEPA instant credit transfers (SCT Inst) for incoming payments by January 2025 and for outgoing payments by October 2025 at the latest.

This regulation thus reaffirms its objective of accelerating the adoption of SCT Inst and aims for greater alignment with traditional SEPA credit transfers.

According to the European Central Bank’s annual report from December 2024, the daily number of instant payments has increased by 72% in 2024 compared with 2023, although its adoption remains heterogeneous across countries and client segments. The use of SCT Inst is driven by individual clients in P2P and C2B transactions, while usage by B2B companies remains low.

Instant payments are therefore not yet the new norm in all European countries. What will be the keys to broader adoption by consumers, and particularly by companies, and what obstacles still need to be overcome?

Standardising and streamlining

The aim of the new European regulation is to accelerate the adoption of SCT Inst at the European market level by facilitating their accessibility and establishing this new standard as a means of conducting fast, secure, and cost-effective transactions. To promote widespread adoption, it is essential to reduce friction. This is why the European Commission (EC) has integrated SCT Inst into the SEPA regulation, ensuring that they are processed under the same conditions and with the same services as traditional SEPA credit transfers.

By standardising SCT Inst, the EC aims to:

1. Strengthen consumer trust: by enhancing security and fraud prevention through a feature that verifies the match between the IBAN^[1] and the beneficiary’s name called verification of payee (VoP).
2. Encourage competition: by providing standardisation to promote the emergence of new payment solutions in-store or online.
3. Improve cross-border transactions: by streamlining cross-border transactions within the Eurozone, and even the EEA, in line with the European Union’s objectives for a more integrated financial market.
4. Support financial inclusion: by making instant payments accessible under the same conditions as traditional SEPA credit transfers to help include more consumers and businesses in the digital economy.

This regulatory approach to instant payments is thus a strategic initiative aimed at optimising payment processes, enhancing the overall efficiency of the payments landscape in Europe, fostering the emergence of new solutions, and regaining control over our payments.

The evolution of consumer and business expectations

There is indeed a fundamental shift in customer expectations. Consumers, accustomed to the instant gratification of digital services, expect the same immediacy in their financial transactions. This expectation is particularly pronounced in interactions in B2C scenarios, where instant payments can significantly enhance client satisfaction. Companies that can offer instant refunds to customers enable greater loyalty and a distinct competitive advantage.

For some businesses, instant payment is a key element of their business model. The purchase of used vehicles is more efficient when payment to the seller is immediate. Under certain conditions, the payment of an insurance premium within seconds can be a differentiating marketing element.

Although the new regulation may ultimately lead to increased adoption of SCT Inst, B2B payments are not expected to grow as quickly as P2P and C2B transactions. This is partly due to the perceived lack of added value for businesses, which is often cited as a barrier to the development of instant credit transfers.

The payment terms practised between companies allow for advance planning of payments. While individuals see a clear benefit in being able to settle a bill via SCT Inst in the evening after work, billing or treasury management teams in companies are at their desks only during business hours. Some clients are beginning to develop automated processing routines, but these are currently isolated examples that apply to SCT Inst received in the early evening.

At the same time, we observe the emergence of specific needs from businesses that may involve large amounts for SCT Inst. This includes the payment for an M&A transaction or urgent settlement, after the cut-off for other types of transfers, to expedite the dispatch of a delivery.

To go beyond these occasional use cases, businesses will need to work closely with software providers to develop new solutions tailored to their needs.

Challenges around banks’ liquidity

Today, there is an asymmetry between, on the one hand, the availability of SCT Inst for users in banks 24/7/365 and, on the other hand, interbank liquidity management systems that still experience daily closure periods, weekends, and annual closure days. This new regulation on SCT Inst undoubtedly marks a starting point for evolving the remuneration and regulation systems of interbank liquidity.

Balancing vigilance and speed

The regulation introduces a new challenge in the fight against fraud, imposing increased vigilance on financial actors regarding the management of thresholds. The accuracy and consistency of information related to beneficiaries is also a key element. This extra attention will intensify for transactions processed in real-time, especially with increasing volumes.

Given that transfers must be completed within a maximum of 10 seconds 24/7/365, the stakes in the fight against fraud are heightened. Banks already have robust systems and precise knowledge of their clients that enable them to identify risks. They will need to continue investing to strengthen their measures.

Accelerating towards greater connectivity

The new European regulation on SCT Inst is an opportunity to reinforce control and promote this payment method among individuals to subsequently broaden its use.

However, we are at the starting point of a movement that is expected to accelerate. Banks are already considering offering businesses new solutions based on SCT Inst to receive payments from their individual or corporate clients. The banking system will need to evolve to continuously adapt its fraud prevention measures and align the balancing and remuneration methods for bank liquidity.

Companies and banks will need to work with their software provider partners to define new payment and treasury management standards.

Numerous projects are underway, and the upcoming period, approached with enthusiasm, will require stakeholders in the ecosystem – companies, software providers, and banks – to co-operate in developing connected and automated solutions.

This new regulation on SCT Inst therefore represents a tremendous impetus for the entire ecosystem to transform and adopt a functioning model that could gradually trend towards real-time operations.

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1 International Bank Account Number}