In today’s fast-paced, digital world, speed and efficiency are paramount – especially when it comes to our financial transactions. But as our payments pick up in speed, so do our concerns over extra costs or unforeseen risks and vulnerabilities.

As a result, we’ve seen the payments industry increasingly introduce efforts to underscore the importance of frictionless payments that don’t compromise on safety. In October 2020, the G20 endorsed a roadmap with targets for improving cross-border transaction and address challenges related to cost, speed, access and transparency while protecting compliance.

This past month, we’ve seen two exciting, breakthrough initiatives in the EU to help the industry move toward reaching these targets. These two seminal initiatives, the provisionally agreed Instant Payment Regulation and the now in force One-Leg-Out Instant Credit Transfer (OCT Inst) scheme, show us the importance of working together to power payments through interoperability.

A European Mandate for Instant Payments

In a landmark move to modernise Europe’s payment infrastructure, the European Council and European Parliament on 7 November reached a political agreement to adopt the Instant Payment Regulation, paving the way for a seamless, real-time payment experience for consumers and businesses across the continent.

This breakthrough Regulation will ensure that instant payments in euros are accessible to anyone with a bank account across the EU, while maintaining affordability and security. The Regulation also mandates payment providers to offer instant payments to customers at costs aligned with traditional transfers and necessitates pre-validation of beneficiary details before they execute payments.

 This is particularly notable for the way it will allow different providers to work together as it mandates IBAN-name check to allow the payer to verify the validity of beneficiary’s account. Although some European countries have already implemented their own Confirmation of Payee systems, this new regulation will significantly reduce fragmentation among existing systems to improve the experience for consumers and businesses transacting across the EU.

While still in its early stages, the new law will ultimately have a positive impact on both the back end of our transactions and on the front end of the consumer experience. The capability to make instant payments from across the EU will streamline transactions, by reducing friction within a payment’s lifecycle. Currently, 72% of Swift payments that need manual interventions are due to preventable errors like formatting issues, incorrect account numbers, and invalid data – the introduction of mandated pre-validation will play a significant role in lowering this figure, ensuring more funds are securely and smoothly transferred and improving the consumer experience.

 Expanding Instant Payments Beyond SEPA

 In parallel, the European Payment Council’s OCT Inst scheme, which was launched on 28 November, will provide the pan-regional infrastructure and interoperability framework that enables instant payments across Europe to be processed more rapidly than ever.

The OCT Inst scheme plays a critical role in bridging the gap between the Single Euro Payments Area (SEPA) and the rest of the world, paving the way for a more seamless and efficient cross-border payment experience.

This would allow payment providers to use existing infrastructure, such as Swift gpi, combined with local domestic instant payment systems, to execute instant cross-border payments without needing to reinvent the wheel. With this scheme, businesses and individuals can make instant payments from their respective countries into the Eurozone, delivering payments within seconds and enabling greater interconnectivity within the global payments ecosystem.

The Power of Interoperability

The benefits of these developments extend beyond just speed and convenience. They have the potential to transform the way businesses operate, enabling them to manage cash flow more effectively, respond to market changes more quickly and deliver better service to their customers.

Interoperability will be key to expanding these benefits, giving instant payment schemes cross-border applicability. As a global cooperative working with over 11,500 institutions, Swift is well positioned to help facilitate these transitions and is already working with local domestic providers to integrate their solutions into Swift’s own Payment Pre-validation service.

We all want to achieve a future of payments that is instant, secure, and seamless – but we need to collaborate to make it happen. The European Commission’s Instant Payment Regulation and the European Payment Council’s OCT Inst scheme are exciting milestones that demonstrate the tangible benefits of interoperability, marking a significant step toward a more modern, efficient, and interconnected payment landscape.

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• Source: https://www.finextra.com/blogposting/25419/a-new-frontier-for-instant-payments-in-the-eu?utm_medium=rssfinextra&utm_source=finextrablogs