Instant Payments Revolution: What You Need to Know About the New EU Regulations

Starting January 9, 2025, a transformative change will reshape how payments are made across Europe. The SEPA Instant Credit Transfer (SCT Inst) scheme will require banks and payment service providers (PSPs) to ensure euro-denominated payments are completed in 10 seconds or less, available to the payee immediately, and confirmed to the payer’s provider in real time. This regulation applies 24/7/365, making instant payments the new standard.

But what does this mean for the industry, and how can financial institutions adapt?

Why This Regulation Matters

Instant payments aren’t just a regulatory requirement; they’re an opportunity for banks and PSPs to modernize, innovate, and lead payment efficiency. With the infrastructure for instant payments in place since 2019, it’s surprising that only 20% of SEPA transactions have adopted this technology. The new rules aim to bridge that gap, setting the stage for broader adoption.

Instant payments align with growing consumer expectations for real-time notifications and transactions, standards already set by wallets and card schemes. Use cases range from same-day shipment of goods to reducing reliance on high-value cash transactions for purchases like cars and furniture.

Key Challenges & Opportunities

1. Technology Upgrades Many banks operate on legacy systems that aren’t equipped for 24/7 operations. Upgrading core banking systems and integrating instant payment engines can be costly but essential. PSPs that seize this opportunity can future-proof their operations for faster processing and cross-border efficiency.
2. Fraud Management With instant payments, fraud detection must also become instant. The risk of fraudulent transfers is up to 10 times higher in instant payments compared to regular credit transfers. Real-time fraud monitoring and enhanced authentication processes are crucial to mitigate these risks.
3. Sanctions Screening Compliance with EU sanctions adds complexity. PSPs must identify restricted entities with screening transactions in real time, a process requiring advanced technology and robust frameworks.
4. Verification of Payee (VOP) By October 2025, PSPs must implement Verification of Payee services to ensure transaction accuracy. This step enhances security but presents challenges in integrating geographically comprehensive solutions.
5. Liquidity Management Processing bulk instant payments within seconds demands liquidity around the clock. Banks will need robust forecasting models and sufficient reserves, especially during weekends and holidays.

UpGate's Role in Real-Time Payments Transformation

The European payments landscape is evolving rapidly. By the end of 2025, instant payments could account for 70-80% of SEPA transactions, significantly reducing delays and improving cash flow for businesses and consumers.

At UpGate, we’re leading the charge by integrating instant payments into our payment orchestration platform. Our partnerships with providers like TrueLayer and Volt.io enable merchants to seamlessly adopt real-time payment capabilities, positioning them to thrive in this dynamic ecosystem whether it's accelerating transaction speed, enhancing user experiences, or boosting operational efficiency.

?? What’s your take on the future of instant payments in Europe? Let’s discuss how UpGate can support your transition to real-time capabilities!

Sources: ey.com - eba.europa.eu - ecb.europa.eu?

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