An accelerated shift to instant payments across Europe
Instant payments are becoming the preferred transaction method for consumers and businesses in the European Union and the United Kingdom. Entities like the European Commission (EC) are driving this progress as they strive to build a more resilient financial infrastructure and make direct payments universally available.
Payment Services Directive 3 (PSD3) and the Payment Services Regulation (PSR)
In June 2023, the EC published proposals for the Payment Services Directive 3 (PSD3) and the Payment Services Regulation (PSR) to keep pace with the rapid developments in the electronic payments market. The Access to Financial Data and Payments Package aims to maintain an efficient market for retail financial services, ensuring the same rules across the EU, clear information on payments, instant payments, consumer protection and a wide choice of payment services.
Challenges with direct payments
Despite this progress, challenges remain. One in three payment service providers in the EU does not offer instant euro payments, and up to 70 million payment accounts in the euro area do not offer holders the option to send and receive instant payments. In many cases, direct payments cost much more than traditional money transfers, often as much as €30 per payment.
Britain’s faster payment system
In Great Britain, the Faster Payments System enables fast and secure transactions between British bank accounts, 24 hours a day. This system drove a 14% increase in the number of payments processed in the second quarter of 2023 compared to the same time the year before.
Highlights and negatives with new payment systems
Pan-European payment collaborations often face challenges, as evidenced by the European Payments Initiative and the more recent P27 initiative. Conflicting interests and poor coordination between coalitions, plus a lack of critical mass participants, are problematic.
Trends that support direct payments
A number of key trends are supporting the accelerated adoption of direct payment methods across Europe. The European Central Bank is exploring a digital euro that could provide a pan-European payment solution under European governance. Financial institutions will need to quickly onboard and deploy institutional-grade digital asset software infrastructure to meet demand and offer Euro digital services to their customers.
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