21 December 2020
ECB sees encouraging growth around Instant Payments but want to move towards full roll-out
The European Central Bank (ECB) has concluded that despite encouraging growth, Instant Payments has not yet become the standard everywhere. In a publication on its website, the ECB writes that ‘despite their increased use and various policy developments and technological breakthroughs in the area of retail payments, Instant Payments have not yet become the new normal’.
This is not in line with the ECB’s ultimate goal which is to enable European citizens and businesses to make electronic payments in real time 24/7 from and to any country in the EU, both at the point-of-sale and online.
The new normal
“Ever since the first Instant Payment solutions emerged around the globe, many industry leaders shared the belief that Instant Payments would become the new normal, and that we would soon be sending and receiving money as quickly as we send and receive text messages or emails. This promise seemed revolutionary for an industry that often depends on complex processing involving multiple actors and systems”, the ECB writes.
The central bank has noticed an encouraging growth in Instant Payments since the launch of the Single Euro Payments Area (SEPA) Instant Credit Transfer (SCT Inst) scheme in 2017. SCT Inst enables pan-European credit transfers and serves as a key element in ensuring the desired widespread adoption of Instant Payments. “An ECB indicator for the euro area shows that at the end of the first half of 2020 SCT Inst transactions made up about 7 percent of all SEPA credit transfers.”
Interconnectedness of infrastructures
The ECB has recently looked at what is preventing the euro area from achieving a full roll-out of Instant Payments and discussed the issue with market actors. The conclusion was that action is needed to improve the interconnectedness of infrastructures involved in the clearing and settlement of Instant Payments.
That is why the Governing Council of the ECB has agreed to update the TIPS participation rules in an effort to ensure that payment service providers (PSPs) and automated clearing houses (ACHs) provide pan-European reach for Instant Payments. The ECB has therefore approved a package of measures to tackle the identified gaps by increasing the reach of its TIPS Instant Payment settlement service to a pan-European level. The measures can be found here.
By introducing these measures, the ECB is taking decisive steps towards the full roll-out of Instant Payments in the euro area. Instant Payments can be an important building block towards the development of pan-European payment solutions. The ECB has been longing for the development of European global payment solutions that can compete with major US and Chinese players. That way, Europe will no longer be dependent on non-European systems, such as PayPal, for cross-border (card) payments.
Furthermore, pan-European reachability across the payment processing chain is necessary to accelerate innovation in the area of safe and convenient front-end solutions which will benefit both businesses and consumers. The ECB is convinced that Instant Payments will play a key role in the future: “With the step towards pan-European reachability, the ECB is confident that the vision of Instant Payments as the new normal in the euro area will soon be a reality.”