From Thursday 9 January, if someone transfers money to you, it should appear in your account in a matter of seconds, at any time, even at weekends and on public holidays. With the (gradual) entry into force of the new regulation on instant payments, the EU is seeking to harmonise practices in the Single Euro Payments Area (Sepa) zone. The aim is to make instant payments the norm, rather than the exception, in the face of growing demand for faster transactions and the rise of online banking. Here's a look at what's at stake in six Q&As.
What's in it for me?
"Customers and businesses will benefit from faster and more efficient payments", says the Luxembourg Bankers' Association (ABBL). From 9 January, all banks in the eurozone will have to be able to receive instant payments. Then, from 9 October, banks will also have to be able to issue such payments.
"All your money transfers will potentially become instantaneous," sums up , head of business innovation at the state savings bank Spuerkeess. "Our customers won't see much change: anyone with an S-net [online banking] account can already make such payments." Until now, there was no legal obligation to offer instant payments to all customers for all Sepa transactions. Banks therefore only offered such transfers for certain types of payment.
Payments too slow?
In Luxembourg, customers do not necessarily perceive a problem with speed at present. But "the switch to instant payments is improving the customer experience", says Pütz. "Instant is becoming the norm. I send you money. You receive it immediately, with payment confirmation. It's now an obligation, and that's a very good thing.”
While the European regulation is a major step forward, instant payments are still far from being the norm worldwide. Money transfers to countries outside Europe remain complex and costly. Processing times can be as long as several days. "This causes huge problems in the supply chain and, in particular, in B2B transactions," laments , CEO of the Luxembourg House of Financial Technology (Lhoft). "At the moment, I have more traceability and certainty when I send a mug to Singapore than when I send euros. It doesn't make sense!"
What impact will this have on retailers?
According to Pütz, retailers are also major beneficiaries of the European regulation: "Firstly, because of the payment guarantee. But also because instant payments, by making transactions smoother, make account-to-account payments more attractive than credit and debit cards. After all, the customer experience is a determining factor in the way consumers spend their money."
While instant payments represent a challenge for the giants of the sector, they will not replace them, Pütz continues: "These two systems are complementary, and each has its strengths. It's a new way of paying that diversifies the offer for customers. However, the card benefits from an established network, the result of 50 to 60 years of development.
Is the Luxembourg banking sector ready?
"The Luxembourg banking sector is well placed to meet these challenges," says the ABBL, pointing out that "the pace of adoption of instant payments in Luxembourg is slightly slower than in the major EU countries, mainly due to the concentration of specific banking services (private banking, wealth management, investment funds) and, consequently, much lower customer demand".
The trade group has set up a dedicated task force to foster collaboration and knowledge-sharing. It brings together experts from the Luxembourg financial regulator CSSF, Luxembourg Central Bank, European Central Bank, banks and service providers.
What are the difficulties for banks?
"The implementation of 24/7 instant payments presents major technical and operational difficulties", notes the ABBL. The main one is for banks to adapt their IT systems, which are designed for batch processing rather than real-time processing.
Interbank settlement systems, such as Target2, only operate during business hours. Innovations such as Tips (Target Instant Payment Settlement) therefore had to be introduced to enable continuous settlement. Other major challenges include ongoing liquidity management, anti-money laundering (AML) controls, the fight against the financing of terrorism (CTF) and cyber security.
Modifying this aspect means rethinking all our processes.
"The real difficulty is change," states Pütz. "The banking profession is evolving rapidly. Payment plays a crucial role in a bank: it's one of its pillars. Changing this aspect is not just a matter of moving from technology A to technology B. It means rethinking the whole process, while meeting the many regulatory and compliance requirements of banks."
For Zubairi, instant payments pose two major challenges for financial players: their cost and fraud management. "Without instant payments, in the event of fraud, it is possible to block the money transfer, which makes it easier to rectify. Instant payments complicate matters because the money has already been transferred." Banks therefore need to invest in real-time fraud detection and compliance systems, stresses the ABBL.
What about beneficiary verification?
From 9 October 2025, banks will have to verify the identity of the beneficiary before validating an instant payment. This measure is designed to combat fraud by ensuring that the beneficiary's name and account number match the information held by their bank. The results of this verification are communicated to the payer, who decides whether or not to carry out the transaction.
This process requires the implementation of standardised and interoperable systems between banks and member states. To achieve this, banks need to adapt their IT systems to the new requirements. It’s a major change for them.
Read the original French-language version of this news report /