Instant payments will dramatically increase the speed at which payments are made and received in euro in the European Union. Today it normally takes one business day for a payment to reach the beneficiary. With instant payments this will happen in real time, 24 hours a day, 365 days a year. The funds will be available immediately for use by the recipient.

The Euro Retail Payments Board (ERPB) has defined instant payments as "electronic retail payment solutions available 24/7/365 and resulting in the immediate or close-to-immediate interbank clearing of the transaction and crediting of the payee’s account with confirmation to the payer (within seconds of payment initiation). This is irrespective of the underlying payment instrument used (credit transfer, direct debit or payment card) and of the underlying arrangements for clearing (whether bilateral interbank clearing or clearing via infrastructures) and settlement (e.g. with guarantees or in real time) that make this possible."

The benefits of instant payments

It is broadly acknowledged that instant payments are beneficial to users, who need or expect them to be immediately available, just like instant communication.There also seems to be an economic rationale for providers to offer instant payment solutions. The main benefits of instant payments, both to user groups and payment service providers, are outlined below:

For consumers

Make and receive payments 24/7/365 with immediate transfer of funds
Optimise cash usage with increased flexibility and convenience
Enable immediate person-2-person mobile payments
Provide for emergency payments at any time
Facilitate future innovative payment products via smart devices

For businesses / governments

Make and receive payments 24/7/365 with immediate transfer of funds
Improve cash flow and process of payment reconciliation
Increase efficiency of e-invoicing and e-billing
Optimise working capital management and minimise need for external financing
Reduce late payments and speed up the payment of invoices
Improve e-commerce, with goods/services released against concomitant payment, thus decreasing the financial risk
Speed up check-out processes at a physical point-of-sale
Increase efficiency of and integrate tax, social insurance or other government-related payments

For payment service providers

Leverage for new business opportunities (e.g. through value-added product offerings to consumers, corporates and merchants)
Strengthen the relationship with current customers
Promote new customer acquisition and subsequent retention
Provide a competitive advantage in the market place
Future-proof core infrastructure

The European Approach

The ERPB has proposed that at least one instant payment solution in euro be available to all payment service providers in Europe. At the same time, irrespective of the payment instrument on which they are based, multiple instant payment solutions may help achieve the objectives of competition, innovation and integration in this market segment, provided that they allow for pan-European reachability. For these purposes, it is expected that solutions be developed at the pan-European level or, if developed at the national level, that they become mutually interoperable at least with solutions based on the same payment instrument.

To speed up the development and roll-out of instant payments for Europe, the ERPB has invited the European Payments Council (EPC) to develop a pan-European instant payment scheme. The scheme will be based on the EPC’s current SEPA credit transfer (SCT) scheme and will be called SCT ^inst.

The Eurosystem is fostering work and dialogue with the industry so that the clearing and settlement layers can support SCT ^inst. The Eurosystem has defined a specific set of expectations for infrastructures offering clearing services for pan-European instant payments in euro.