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

The European Union is backing fast and secure cashless payment in Europe. This will enable consumers to make real-time payment transfers within seconds to a recipient bank account. According to an 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 are experiencing that as a result of the current situation due to COVID-19 this has significantly pushed forward cashless payments in Europe,“ said Sertac Cetiner, Head of Payments at Valantic. The company specialises in financial software and has 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, currently 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’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 behaviour remain in Europe and are subject to European data protection,” said Sertac Cetiner from valantic. 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 digitalisation 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.

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