Following the Union's initiative to promote a capital markets union, the EU co-legislators on March 3rd, 2024, adopted Regulation (EU) 2024/886 on instant credit transfers in euro, often called the 'Instant Payments Regulation' (IPR), intending to encourage instant payments within the EU. The IPR was published in the Official Journal of the European Union on 19 March 2024 and entered into force on 8 April 2024. With the help of the Instant Payments Regulation, people will be able to send and receive money in the same country as well as to other EU members in ten seconds, at any time of the day. The regulation takes into consideration the particularities of non-euro area entities.
The Rationale behind the new rules
The new laws will increase the strategic autonomy of the European economic and financial sectors by reducing undue reliance on third-country financial institutions and infrastructures. Enhancing the ability to mobilise capital flows will benefit businesses and citizens alike and enable the creation of novel added-value services.
It will be required for payment service providers, including banks, to provide the ability to send and receive instantaneous payments in euros, in addition to their usual credit transfers in euros. If any fees are necessary, they shouldn't be higher than those associated with regular credit transfers.
Following a faster transition phase in the euro area and a longer one in the non-euro area—which requires more time for adjustment—the new regulations will go into effect.
The regulation grants access for payment and e-money institutions (PIEMIs) to payment systems, by changing the settlement finality Directive (SFD). As a result, these entities will be covered by the obligation to offer the service of sending and receiving instant credit transfers, after a transitional period. The regulation includes appropriate safeguards to ensure that the access of PIEMIs to payment systems doesn't carry additional risk to the system.
This regulation contains a review clause which sets out an obligation on the Commission to complete a report displaying an evaluation of the development of credit charges over time.
Conclusion
The recent EU adoption is a step in the right direction towards modernising payment methods. A turning point in the development of contemporary payments is represented by the EU's commitment to welcoming innovation in the financial sector since this regulatory framework strikes an essential balance between technological advancement and financial integrity and safety.
For detailed information please refer to the Regulation (EU) 2024/886 of the European Parliament and of the Council.
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