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EU plans to establish comprehensive standard for electronic real-time payments

November 3, 2020

  • valantic FSA has already equipped first European banks with real-time payments 
  • Legal obligation for PSP to offer instant payment conceivable 
  • Banks should take advantage of the consumer’s confidence bonus 

Frankfurt am Main / Magdeburg, 03 November 2020 – The European Union promotes the establishment of a comprehensive payment standard for fast and secure cashless transactions in Europe. With instant payments, consumers can use real-time payments for transferring money within only a few seconds to the recipient’s bank account. According to the EU strategy paper published in September 2020, the commission aims for a full enforcement of instant payments within the EU until the end of 2021. “We experience that the current situation due to COVID-19 has significantly pushed forward cashless payments in Europe,“ said Sertac Cetiner, Head of Payments at valantic FSA. The company is a specialist for financial software and has already equipped first Eastern European banks with real-time payment systems and the ability to provide digital payment requests called Request to Pay. Erste Bank Hungary, a subsidiary of the Austrian Erste Group, already provides nationwide real-time payments with a duration of less than five seconds. It is also possible to easily initiate those payments via a payment request at the point of sale. For this, valantic FSA’s modular payment hub has been adjusted according to the bank’s specific needs.

More trust in banks than in FinTechs

Compared to modern FinTech companies or payment service providers, consumers still place their confidence in banks as the recent study “The Ultimate Guide to the Future of Banking“ by MX Technologies Inc. shows: 93 per cent of the respondents have more trust in banks than in big tech companies, such as Google or Apple, and their payment services. More than 80 per cent of the surveyed people use mobile banking on a weekly basis and only three per cent of the respondents still trust in bank branches. “The new world of banking will – to a large extent – be digital and, together with the planned standards of the EU commission, a strong competition for all alternative payment service providers. Data protection contributes to this as with EU-regulated banking services, sensitive data regarding the purchasing behavior remain in Europe and are subject to European data protection,” said Sertac Cetiner from valantic FSA. The instant payment solution of the Erste Bank Hungary complies with the regulations of the National Bank of Hungary and, with regard to the transaction speed, it surpasses the provisional guideline catalogue for the SEPA R2P model of the European Payment Council and will with reasonable certainty meet the final EU- standard yet to be specified.

Potential obligation of providing real-time payments

Whereas cash is still allowed in retail, payment service providers (PSP) should be obligated to offer real-time services – if necessary, by law. After the expiry of the transition period for the provision of “SEPA Instant Credit Transfers“ in November this year, Brussels plans to check how many PSP and bank accounts are ready for instant payments. If the result does not meet the commission’s expectations, a draft law for the compulsory participation in the SCT Instant Scheme will be submitted by the end of 2021 in order to oblige PSP to process instant payments. “We generally recommend banks to accelerate their digitalization strategy in order to respond to the real-time aspect because currently banking software is in many cases only updated overnight,“ explained Sertac Cetiner from valantic FSA.

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