In a landmark development, a legal agreement reached late Tuesday signals a potential end to the lengthy waiting times associated with cross-border money transfers for Europeans. The deal, brokered between Members of the European Parliament (MEPs), the European Commission, and the EU Council, is set to expedite the passage of a regulation on instant payments through the EU legislative process, with implementation expected within the next few years.
Instant payments, allowing the swift transfer of funds between bank accounts, have been a goal long pursued in the financial landscape. The new EU law, once enacted, aims to make instant payments the default option across the entire bloc, marking a significant advancement lauded by consumer advocates.
While the technology for instant payments has been available for some time, widespread adoption has been hindered by several factors. The short transaction window poses challenges for banks to conduct necessary checks, preventing fraud and money laundering. In 2022, EU Commissioner Mairead McGuinness proposed legislation to make instant payments mandatory, with the Commission arguing that this move would unlock billions of euros currently tied up in transit through payment systems.
Under the new plans, banks will be required to offer instant payment services to their clients at no additional cost, adhering to strict deadlines. Dutch lawmaker Michiel Hoogeveen, who guided the proposals through the European Parliament, emphasized the obligation on banks to provide this service within designated timeframes.
The deal also introduces additional security measures, mandating banks to verify that the beneficiary’s name matches the account number. This measure aims to thwart scams such as authorized push payment fraud, where individuals are deceived into transferring substantial sums to fraudulent accounts under the guise of legitimate invoices.
According to the Council of the EU, countries outside the eurozone, including Sweden and Poland, will have a more extended transition period to comply with the new regulations.
While the main elements of the agreement have been endorsed by representatives of the EU’s Council and Parliament, the formal signing off by both institutions is pending. Previous legal drafts suggest that the law will take effect between six and 36 months after finalization.
Agustin Reyna, Director of Legal & Economic Affairs at the EU consumer advocacy group BEUC, expressed optimism about the breakthrough, stating, “Consumers will be able to send and receive instant credit transfers at the same price as normal credit transfers, and in most cases, this will be for free.”
While consumer advocates celebrate the move toward universal, affordable, and secure instant transfers, some banks, which currently offer instant payments as a premium service, have expressed reservations about losing commercial flexibility. The European Banking Federation, in a January paper about the draft law, argued for market-driven decisions regarding the offering and pricing of instant payments.
EU Commissioner Mairead McGuinness hailed the development as fantastic news for those seeking swift payment processing, emphasizing that the new rules will make instant transfers universally accessible, affordable, and secure.