An Accelerated Shift to Instant Payments Across Europe


Instant payments are set to become the foundation for consumer and commercial transactions, including card, mobile and online payments, across the European Union and the United Kingdom. But important steps are needed for a successful implementation.

The European Commission is a key driver of instant payment solutions that help streamline the operations of payment service providers (PSPs), including strategies that integrate technologies focused on promoting digitization and increasing payment efficiency.

The Commission has recognized the natural place of cryptocurrencies in this instant payment landscape, initiating a proposal to a sandbox environment for crypto payments within the EU. Regulators plan to take advantage of this sandbox to study the impact on market integrity and financial stability and apply those learnings to future legislation. Additionally, the region is taking tangible steps toward greater interoperability through a combination of institutional support for crypto solutions and providing clear and consistent regulatory guidelines and standards.

In the United Kingdom, the Bank of England renews its Real-time gross settlement service to offer a range of new features and capabilities for payments and settlements between financial institutions. The UK’s New Payments Architecture (NPA) for retail payments is also being developed to allow access to a single clearing and settlement mechanism, using ISO 20022 messaging to enable more participants to use the UK payment infrastructure and remain interoperable with payment services around the world. balloon.

Let’s take a closer look at the current state of European payments, delve into the trends that are helping pave the way to adoption, explore the steps needed to get there, and consider the opportunities in the near future.

Desire to streamline instant payments in Europe

The European Central Bank (ECB) has long wanted make instant payments available to all PSPs in the EU. Several EU countries have prioritized state-level solutions for instant payments due to concerns about operational issues when scaling to cross-border payments. This goes back to 2016 Payment Services Directive 2 (PSD2) which aims to “increase competition in an already competitive payments industry, incorporate new types of payment services, improve customer protection and security, and expand the scope of the Directive.” This legislation addressed directly to the UK Competition and Markets Authority (CMA) requiring an “open banking standard” for the nation’s largest banks to share customer and transaction data with third parties.

The European Payments Council has also advanced through the SEPA instant credit transfer system—an update to the original SEPA (Single Euro Payments Area) program designed to reduce data friction and cost issues in euro payments—which requires payments to be settled in 10 seconds or less between the 26 countries involved. Not all PSPs in the region are part of the SEPA network, which means that it is not an inclusive solution for all payment providers in the region. While SEPA Instant Credit Transfer offers instant payments for participating PSPs, it still requires transaction clearing and final positions to be established for settlement by clearing companies or even pre-financing in certain cases.

In the UK, the Faster payment system allows payments to be transferred quickly and securely to and between UK bank accounts, 24 hours a day. Only in 2021, FPS processed 3.4 billion payments—a 20% increase from 2020—worth £2.6 trillion—a 24% increase from 2020. The system is also growing rapidly in terms of participating financial institutions—40 banks, PSPs and fintechs have joined FPS to date.

Expansion of cryptographic solutions, such as Ripple’s crypto payment solution which frees up working capital by eliminating the need for pre-financing and eliminates the need for complex background clearing mechanisms, it can open new doors for making instant payments available to more PSPs. Adopting this crypto strategy would further enable instant payments across Europe, regardless of currency symmetry or capital resources.

Support Key Trends

Two parallel movements support the accelerated widespread adoption of instant payment methods across Europe. First, both the B2B and B2C payment landscapes are rapidly modernizing. Consumers and businesses alike increasingly expect international payment rails to work as seamlessly as domestic rails. The proliferation of Blockchain technology in the region has resulted in a widespread expectation of cheaper digital payments, which may also help bolster the perception and adoption of other digital and cryptocurrency-backed tools that streamline payments.

The second move is the rise of interest in central bank digital currencies (CBDC), not only in Europe but worldwide: more than 90% of central banks globally are investigating or testing CBDC. This technology offers myriad benefits, including optimizing payments for domestic fiscal policy. The Bank of England, the Swedish Riksbank and the European Central Bank are exploring CBDCs, with a focus on data privacy and financial inclusion. Sweden, an already highly digitized economy, has seen a massive decline in the use of cash in recent years. As a result of a proactive investigation, Sweden has emerged at the global forefront of the CBDC movement.

Other parts of the world are exploring digital currency solutions, including the Republic of Palau, bhutan, MexicoY Porcelain. The introduction of CBDCs in such diverse economies will have powerful economic impacts, such as greater financial inclusion, greater opportunities for innovation and greater efficiency.

So while Europe is already forging ahead with new payment rails to boost the region’s economies, its technology leadership and digital-first approach will put it at an even greater competitive advantage.

obstacles to overcome

Despite the progress made towards an instant payment system, there are obstacles to overcome in order to achieve full adoption of instant payment methods in Europe. While technology is key to achieving instant payments, clear regulation is needed to ensure that instant payments have legal and public support throughout the region. Regulators around the world are pushing instant payments and the adoption of open banking, but to get to the future of cross-border payments, further alignment is vital.

Efforts like the Libra Digital Foundation and Euro Digital Association—whose aim is to embed digitization in the economy, must be defended and expanded in order for modern payment methods to succeed in Europe. Not only for instant fiat payments, but also for other emerging digital asset solutions such as crypto and CBDC payments.

Opportunities abound for the EU and the UK

Instant payments will take center stage across Europe this year, and the ever-increasing range of technology-driven and institution-driven options will disrupt the space for businesses and their end users. With CBDCs and cryptocurrencies are predicted to have the biggest impact In the global payments landscape over the next two decades, positive sentiment and action towards greater adoption is likely to trend exponentially.

Emerging tools from non-bank providers may also play a larger role in everyday financial activities. for example, a digital wallet for online purchases or “buy now pay later” Crypto-enabled solutions that can reduce friction in the enterprise payment ecosystem.

In certain countries, regulation around open banking and instant payouts look promising and have continued to rise. For example, the UK has been proactive in introducing open banking regulation for financial products such as mortgages and investments, as well as expanding API capabilities to better streamline money flow and build payment infrastructure.

Instant payment technologies coupled with clear regulation can help streamline and digitize the financial industry across the region, increasing competition and innovation in the space to position Europe as a leader in the global economy.

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