European Banks Grapple with SEPA Instant Payment Deadline: 58% Deem Unrealistic

by Jared Kirui
  • The challenges include adapting customer channels, implementing KYC, and the provision for sanction screening.
  • There is a growing demand for instant payment products and services, with 89% of respondents acknowledging this trend.
Europe
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The majority of European banks are facing a difficult situation regarding the timelines for implementing the Single European Payments Area (SEPA) instant payments set by the EU. A report by RedCompass Labs revealed that 58% of 200 senior payment professionals surveyed find the timelines unrealistic.

Embracing Instant Payments

According to the survey, there is looming uncertainty over the readiness of banks to facilitate SEPA instant payments. One of the key findings of the research is that European banks are underestimating the volume of payments they need to process per second.

Instant payments accelerate the movement of money between businesses and individuals. While the average target is between 101 and 300 payments per second, experts suggest that aiming for at least 1,000 payments per second is imperative, considering the magnitude of bulk payment files.

Source: RedCompass Labs
Source: RedCompass Labs

The transition towards SEPA instant payments is hindered by the challenges faced by the European banks. The top five hurdles include adapting customers' channels, implementing the provisions for KYC and sanctions screening, scaling throughput, creating value-added offerings, and ensuring 24/7 availability.

Tom Hewson, the Partner and CEO at RedCompass Labs, mentioned: "Europe is taking a leap forward with new legislation that will make around-the-clock instant payments the new normal. This is an exciting development, but the deadlines are tight. Banks, already extremely stretched delivering the migration to ISO 20022, must be able to send and receive instant payments by the end of 2025. That’s a big ask."

Benefits of Instant Payments

Despite these challenges, there's a silver lining for European banks. A significant 77% of the respondents in the survey believe that the benefits of instant payments outweigh the costs. Moreover, there's a growing demand for instant payment products and services, with 89% of respondents acknowledging this trend.

Source: RedCompass Labs
Source: RedCompass Labs

The adoption of new rules for instant Euro transfers by MEPs marks a significant milestone in Europe's journey towards instant payments. The legislation aims to promote SEPA integration, strengthen the Euro's international role, and reduce reliance on foreign payment schemes.

Hewson added: "As a bank, your internal systems must be ready to handle the increased volume and speed of transactions. In the past, we talked about hundreds of transactions per second for bank-to-bank systems. Currently, it is multiples of thousands per second. You will need to cover downtime and system outages while recording and synchronizing data accurately, in real-time, across various parts of the payment system for it to be reliable."

The majority of European banks are facing a difficult situation regarding the timelines for implementing the Single European Payments Area (SEPA) instant payments set by the EU. A report by RedCompass Labs revealed that 58% of 200 senior payment professionals surveyed find the timelines unrealistic.

Embracing Instant Payments

According to the survey, there is looming uncertainty over the readiness of banks to facilitate SEPA instant payments. One of the key findings of the research is that European banks are underestimating the volume of payments they need to process per second.

Instant payments accelerate the movement of money between businesses and individuals. While the average target is between 101 and 300 payments per second, experts suggest that aiming for at least 1,000 payments per second is imperative, considering the magnitude of bulk payment files.

Source: RedCompass Labs
Source: RedCompass Labs

The transition towards SEPA instant payments is hindered by the challenges faced by the European banks. The top five hurdles include adapting customers' channels, implementing the provisions for KYC and sanctions screening, scaling throughput, creating value-added offerings, and ensuring 24/7 availability.

Tom Hewson, the Partner and CEO at RedCompass Labs, mentioned: "Europe is taking a leap forward with new legislation that will make around-the-clock instant payments the new normal. This is an exciting development, but the deadlines are tight. Banks, already extremely stretched delivering the migration to ISO 20022, must be able to send and receive instant payments by the end of 2025. That’s a big ask."

Benefits of Instant Payments

Despite these challenges, there's a silver lining for European banks. A significant 77% of the respondents in the survey believe that the benefits of instant payments outweigh the costs. Moreover, there's a growing demand for instant payment products and services, with 89% of respondents acknowledging this trend.

Source: RedCompass Labs
Source: RedCompass Labs

The adoption of new rules for instant Euro transfers by MEPs marks a significant milestone in Europe's journey towards instant payments. The legislation aims to promote SEPA integration, strengthen the Euro's international role, and reduce reliance on foreign payment schemes.

Hewson added: "As a bank, your internal systems must be ready to handle the increased volume and speed of transactions. In the past, we talked about hundreds of transactions per second for bank-to-bank systems. Currently, it is multiples of thousands per second. You will need to cover downtime and system outages while recording and synchronizing data accurately, in real-time, across various parts of the payment system for it to be reliable."

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