Previously known as Regulation (EU) 2024/886, Instant Payment Regulation (IPR) marks a major shift in the European Payments Landscape. Instant credit transfers should be made available by all PSPs processing credit transfers in euros across the Single Euro Payments Area (SEPA) region.
IPR seeks to benefit both PSPs and consumers by maximising the value of immediate credit transfers at the full-scale network level. The main drivers for the regulatory push are improvements in economic efficiency, less market concentration, and more competition and options for electronic payments, especially for cross-border transactions.
Understanding the intricacies of IPR is essential for Financial Institutions (FIs) and Payment Service Providers (PSPs) wishing to achieve compliance and capitalise on the advantages of fast payments.
What is the Instant Payment Regulation (IPR)?
The IPR is a regulatory framework established by the European Union to facilitate instant credit transfers in euros within SEPA. The primary goal is to ensure that credit transfer are processed in real-time, with funds made available to the payee within seconds, irrespective of the time or day. The driving factor in adoption would be the provision that no additional charges over and above charged for credit transfers can be levied for processing of instant credit transfer.
Why Was IPR Introduced?
Despite the availability of instant payment schemes, the adoption of SEPA instant credit transfer across the EU has been low. This has resulted in stifled innovation and the lack of new products with European payment ecosystem falling behind its peers.
The IPR closes these gaps by mandating the provision of SEPA instant credit transfers in eurozone, to achieve:
- Enhanced Payment Efficiency: Reduced settlement times and improved cash flow for businesses and individuals unlocking economic gains.
- Integrated SEPA Zone: Uniform implementation of instant SEPA credit transfers strengthens the EU internal market to facilitate cross-border transactions.
- Increased Competition: Ubiquitous provision of instant payment services will level the playing field, encouraging the launch of new innovative products by PSPs.
- Reduced Fraud Risks: The regulation mandates verification of payee process at no extra charge, reducing the likelihood of fraudulent transactions.
Key Definitions Under IPR
- Instant Credit Transfer: A credit transfer where funds are made available to the payee within seconds, 24/7, throughout the year.
- Payment Account: An account held in the name of one or more payment service users used for the execution of payment transactions.
- Payment Service Provider (PSP): An entity authorised to provide payment services, including payment initiation service which provisions initiation of a payment order at the request of the payment service user with respect to a payment account held at another payment service provider.
- Single Euro Payments Area (SEPA): A region comprising EU Member States and associated territories where uniform payment standards and practices are applied.
Key Takeaways for Instant Payments
- SEPA Instant Credit Transfer: PSPs must offer instant SEPA credit transfer services in euros to their customers, ensuring accessibility for both sending and receiving payments.
- Real Definition of Instant: The payee’s PSP shall, within 10 seconds of the time of receipt of the payment order for an instant credit transfer by the payer’s PSP, make the amount of the payment transaction available on the payee’s payment account in the currency in which the payee’s account is denominated and confirm the completion of the payment transaction to the payer’s PSP.
- Charges for SEPA Instant Transfers: Charges for instant credit transfers must not exceed those for traditional credit transfers, promoting fair pricing and encouraging adoption.
- Verification of Payee (VoP): PSPs must implement mechanisms that verify the payee’s name and account details with payee’s PSP before executing a transfer, enhancing security and reducing errors.
- Charges for VoP: PSP’s must provide Verification of Payee service free of charge.
- Sanctions Screening: PSPs must ensure that instant credit transfers comply with Union restrictive measures, preventing transactions involving sanctioned entities.
Conclusion
The Instant Payment Regulation is a transformative shift in the European payments landscape, mandating real-time processing capabilities that benefit consumers and businesses alike.
PSPs, EMIs and PIs must aim for proactive compliance not only to meet regulatory requirements but also to remain competitive in a fast-moving market. Financial institutions can enhance service offerings, improve customer trust in digital banking, and contribute to the broader goal of a unified and efficient European payments ecosystem.
PSPs, EMIs and PIs – Ready to implement Verification of Payee before 9 October 2025? Contact our experts at vop@technoxander.com today and begin your compliance journey.
