Brussels, 26 October 2022
Remarks by Executive Vice-President Dombrovskis at the Press conference on the Commission’s proposal for a regulation on instant payments
Good afternoon, everyone – welcome to this press conference. It should be easy for all of us to pay our bills and for daily purchases. But it could be even easier – with instant payments that settle your account in just a few seconds.
The world’s payment industry is already making a large-scale move to instant. Europe needs to keep up: to remain globally competitive and to make the most of the opportunities provided by the digital age.
This is what we aim to achieve with today’s proposal. We want to make instant euro payments available to anyone in the EU with a bank account – individuals as well as businesses.
However, in the EU today, only 11% of all money transfers in euros are instant. One in three payment service providers do not offer euro instant payments. Even within this low level of uptake, the picture is very different between countries. In several, there is zero to minimal uptake. And in most, instant payments simply cost more than traditional transfers.
We need to change this.
Today, we are proposing that any EU bank that offers euro money transfers will have to offer customers their instant version as well. In addition, payment providers must not charge more for instant payments than for traditional transfers.
As with any new technology, security is paramount. To protect against mistakes or fraud, and also to strengthen trust in instant payments, providers must check whether the name of the beneficiary matches the bank account number.
We also want to streamline the system for preventing individuals sanctioned by the EU to make payments, and for freezing their funds. At the moment, payment providers err on the side of caution and reject up to 9.4% of cross-border instant payments because they suspect a breach of EU sanctions.
However, these suspicions are unfounded in 99.8% of cases. To avoid this happening, we need to make the system more efficient. There are numerous advantages and benefits that come with instant payments.
Firstly, for people: Everyone should be able to send and receive money within 10 seconds and with 24/7 availability throughout the year. They get more choice about how to pay. They can avoid late payment penalties and manage their household budgets more efficiently.
Businesses, especially small ones, can be in better control of their cash flow: Today, nearly two-thirds of EU businesses maintain a cash contingency to cover the time it takes to receive payments.
And operational costs are lower for merchants who accept instant payments for their goods and services.
Then, for EU banks and fintechs, instant payments offer more opportunities to innovate, attract new clients and compete with large international players.
They can use instant payments as a springboard to develop new services and products such as mobile payment apps.
This type of credit transfer releases funds locked in the ‘back-office’ of the financial system. The ‘payment float’, as it is called, on any given day amounts to almost €200 billion.
Once freed up, it can be put to productive use in spending and investment – and contribute to Europe’s economic growth.
Today’s initiative aims to give instant payments a much-needed boost across the EU. We do not want to lag behind with this major technological innovation in the financial sector.
Many people do not think too much about payments. But they matter a great deal. Our proposal will not only support innovation and competition in the EU payments market.
It will also help to strengthen the international role of the euro, and contribute to our wider objectives on digitalisation. The work does not stop here. We also want to extend euro instant payments internationally at a later stage.
Thank you and I now pass the floor to Commissioner McGuinness.
Source – EU Commission
Remarks by Commissioner McGuinness at the Press conference on the Commission’s proposal for a regulation on instant payments
Thank you Valdis, and good afternoon.
I mean, this is a very simple idea: with a click, money should change hands quickly. And perhaps this should have happened organically, but it didn’t, and so we’re taking this step today to make it happen, and to make it happen for the benefit of citizens and businesses.
There’s a whole lot of power in the idea of being able to transfer within ten seconds, as Valdis has mentioned. And there are so many possibilities for individuals and businesses from this facility that we want to unleash that power and we want it to happen more rapidly.
We would estimate that if we left it to the market, it might take a decade for instant payments to become the norm. And therefore we are nudging this sector in this direction.
Valdis mentioned the figure of 200 billion euros that would be freed up on any given day, and this is an extraordinary high figure with much potential if it were available to participants.
So some few points around the initiative.
The first point is that instant payments will become universal. I mentioned that it could take a decade if we do nothing and doing nothing is not an option. So we need to speed up the process. So our proposal will mandate anyone who offers transfers in euro to offer an instant option. But we are phasing in the requirements. Providers who are not in the Eurozone, but that offer euro transfers, will have an extra two years to comply with the requirements. And that will allow providers focus their resources as they adapt to these changes.
Second point: instant payments will be a standard and affordable feature, not a premium service. Part of what’s holding instant payments back is that they can be expensive. So we are introducing a cap on fees. If fees are charged at all, they will not be allowed to exceed fees for non-instant transfers.
Third point: we are beefing up consumer protection. Providers will have to offer consumers the service of checking that the name and the recipient matches the IBAN, the bank account number. And that provides an extra layer of protection before a payment is made against mistakes or fraud.
Finally, we are making sanctions screening more efficient. At the moment the vast majority of cross-border payments that are flagged during screening are false positives. Under this new legislation, providers will be responsible for screening their clients against the latest EU sanctions list. That applies when someone first opens a payment account, and then via at least daily updates of customer records. And providers will be able to prevent accounts held by those under sanctions from carrying out transactions and to freeze their funds.
This streamlining will save money, while still ensuring maximum vigilance. So in closing, today’s proposal is a significant one in a number of respects. We are supporting European innovation by enabling the roll-out of the latest technology. We are supporting European competitiveness by keeping up with global developments on payments.
And we are supporting European consumers and businesses who will be able to see the difference this proposal makes in their daily lives.
Thank you.
Source – EU Commission