What are instant payments?
26 September 2016 (updated on 1 February 2020)
We live in a world of instant messages yet it can still take as long as a business day to complete an electronic payment. And if we make an electronic payment at the weekend or on a bank holiday, it might not even begin its journey to the recipient until the next business day.
With instant payments, the money is made available within seconds on the account of the recipient, 24 hours a day, 365 days a year. In some countries, this is already possible. But it should be possible in every European country, not only for euro payments you make to a person or business in the same country as you, but also to those in another European country. To make this a reality, European payment service providers have agreed on a common set of rules and standards for instant payments, called the SEPA instant credit transfer scheme.
SEPA stands for Single Euro Payments Area: the goal of SEPA is to make it possible for us to make euro payments to anyone located anywhere in Europe as easily, securely and efficiently as within our own country – whether that be by direct debit, debit card or bank transfer.
What are the benefits of instant payments?
With instant payments, you can send and receive electronic payments in euro anytime and anywhere. In some countries, you can already send instant payments via mobile phone, giving you the same experience in terms of speed and convenience as with cash, for example when sharing a dinner bill with colleagues or lending some money to a friend or relative.
In e-commerce, instant payments eliminate the risk for online merchants of not getting paid, as the release of goods and services can be easily synchronised with the payment. For business-to-business payments, instant payments improve cash flow, make it easier to manage funds, reduce late payments and speed up the payment of invoices.
Instant payments can also be a vehicle for financial inclusion. According to EU law, all EU citizens have a right to open a basic payment account regardless of their financial situation or place of residence. The possibility to send and receive instant payments from a mobile phone can be an incentive for people to either access financial services for the first time, or use them more often.
When can I use instant payments?
Payment service providers are not obliged to offer instant payments to their customers. The ECB encouraged payment service providers to make instant payment solutions in euro available to their customers as of November 2017. Some have done so and some plan to do so later. Experience from countries that are already using instant payments, such as Denmark and Sweden, shows that they quickly become very popular.
What is the ECB’s role?
The ECB is interested in instant payments because we are responsible for the safety and efficiency of electronic payments in euro.
To promote innovation in payments, we work with the financial industry to agree on common rules and standards and remove any remaining obstacles to payments across countries within the EU. The ECB also chairs a group – called the Euro Retail Payments Board – which brings together representatives of providers and users of payment services, who work together to make the payments market in the EU more integrated, innovative and competitive. The Euro Retail Payments Board has driven the work on pan-European instant payments and is monitoring progress as they become more widely used.
To make it easier for more payment service providers to offer instant payments, the ECB is developing a new service that will enable them to settle payments immediately, safely and around the clock. The TARGET instant payment settlement (TIPS) service will be launched in November 2018 and should provide an additional incentive for payment service providers to offer instant payments because it will make it easier for them to reach the customers of other payment service providers across Europe, and to do it at a low cost. As a result, instant payments should soon become commonplace across Europe. Watch this space.
Learn more about this project: TARGET instant payment settlement (TIPS)