Instant transfers: SEPA Instant and the EU Instant Payments Regulation

What is an instant transfer?

An instant transfer is a credit transfer in which the funds are available to the payee within a few seconds of the payment being sent, regardless of the time of day or the day of the week. In a traditional SEPA credit transfer, payments are processed in batches on banking days, and it may take until the next banking day for the funds to arrive. With an instant transfer, each payment is processed individually and immediately.

For the user, the difference shows up mainly as speed. Behind the scenes, however, the change is fundamental: banks’ systems must be available continuously, liquidity must be managed around the clock, and fraud and error prevention must take place before the payment leaves, because correcting it afterwards is considerably more difficult.

SCT Inst and clearing and settlement systems

Instant transfers in the euro area are based on the SEPA Instant Credit Transfer scheme (SCT Inst) maintained by the European Payments Council (EPC). The scheme was launched in November 2017. SCT Inst is not itself a technical platform but a rulebook that defines participants’ rights and obligations, messages and time limits.

The actual settlement takes place in clearing and settlement systems. There are two pan-European options:

• TIPS (TARGET Instant Payment Settlement) is a Eurosystem service in which payments are settled in central bank money. The service was launched in November 2018.
• RT1 is a pan-European instant payment system operated by EBA Clearing, launched at the same time as the SCT Inst scheme in 2017.

In addition, national instant payment systems operate in some countries. A bank must be able to reach all banks in the euro area that receive instant payments, which in practice requires a connection to at least one pan-European system or interoperability between them.

EU Instant Payments Regulation (EU) 2024/886

Although SCT Inst had been available since 2017, its adoption progressed unevenly. Some banks did not offer instant payments at all, and some priced them considerably higher than ordinary credit transfers. The European Union responded with Regulation (EU) 2024/886, which entered into force in April 2024. The regulation amends the earlier SEPA Regulation and contains four key obligations:

1. Availability: payment service providers that offer ordinary credit transfers in euro must also offer the receiving and sending of instant transfers.
2. Speed: funds must be made available to the payee within ten seconds of receipt of the payment order.
3. Pricing: charges for an instant transfer must not be higher than those for a corresponding ordinary credit transfer.
4. Security: the payer must be offered verification of payee, and sanctions screening practices are changed.

In addition, the regulation requires that the payer be able to set a maximum amount for their instant transfers, giving users a way to limit the damage from potential fraud.

Timeline of obligations

The regulation’s obligations take effect in stages. Deadlines are earliest for banks in the euro area and later for non-euro area Member States and for payment and electronic money institutions.

In non-euro area Member States, additional time until 9 June 2028 has been granted for instant transfers sent outside business hours from accounts in the national currency. Finland is part of the euro area, so the receiving, sending and verification obligations already apply to Finnish banks.

Verification of payee (VoP)

Verification of payee (VoP) is one of the most significant practical changes introduced by the regulation. Before the payer approves a credit transfer, their bank checks with the payee’s bank whether the name entered matches the name linked to the account number (IBAN). The payer is shown the result before approval.

The result is typically one of the following: the name matches the account, the name is a close match (for example a typing error, in which case the payer can be shown the correct name), the name does not match the account, or verification is not possible. The payer may still decide to send the payment, but must be informed of the possible consequences.

Verification is aimed in particular at so-called invoice fraud, in which the payer receives a forged invoice or a notice of a changed account number. Verification is free of charge for the payer, and it applies to both instant and ordinary credit transfers in euro.

Technically, VoP adds a new interbank query to the payment journey, which must be fast so that the user experience remains smooth. The European Payments Council has drawn up a dedicated rulebook for verification, enabling banks to implement the queries consistently.

The change in sanctions screening

Before the regulation, many banks screened every payment individually against sanctions lists. Within the ten-second time limit, this caused significant delays and false stops. The regulation changes the approach: payment service providers offering instant transfers must check their own customers against the EU lists of targeted restrictive measures regularly, at least daily and whenever the lists are updated. Screening of individual payments for sanctions purposes is then no longer required in the same way.

The change does not remove other obligations relating to anti-money laundering and countering the financing of terrorism. Risk-based transaction monitoring continues, and suspicious payments can still be stopped.

Technical implications for systems

The shift of instant payments to a baseline service affects the systems of banks and providers in many ways:

• Continuous availability. Maintenance windows can no longer be scheduled for nights or weekends; systems must be designed to be updated without downtime.
• Real-time funds checks and liquidity. The account balance must be checked and reserved immediately, and liquidity in settlement accounts must be managed around the clock.
• Fraud prevention before the payment. The risk assessment must be completed within milliseconds, because the payment cannot in practice be stopped after execution.
• ISO 20022 messages. Instant payments use structured messages whose rich data content facilitates automatic matching.
• Observability. It must be possible to track each payment in real time so that anomalies are detected before the customer notices them.

What the change means for merchants

For merchants, the spread of instant transfers opens up new opportunities. An account-to-account payment initiated through a payment initiation service and executed as an instant transfer can arrive within seconds. The order can then be confirmed immediately, without waiting until the next banking day for the payment to arrive.

On the other hand, the irrevocability of instant transfers underlines the importance of the refund process. Merchants must plan how refunds are made, how they are matched to the original payment and how the customer is identified in connection with the refund. Reconciliation also changes: when payments arrive continuously, including at weekends, reconciliation must be automated and carried out at transaction level.

In addition, verification of payee may affect how the merchant’s name appears to the payer. If the name used on an invoice or payment page differs from the official account holder, the payer may receive a warning. It is therefore advisable to ensure that the name used in invoicing matches the name of the bank account holder.

Sources and further reading

1. Regulation (EU) 2024/886 as regards instant credit transfers in euro, EUR-Lex
2. European Central Bank: Instant Payments Regulation
3. European Payments Council (EPC): SEPA Instant Credit Transfer
4. Finextra: Europe’s Instant Payments Regulation and the 9 October deadline, explained