For a very long time in many European countries, traditional bank transfers were the only choice to pay or use Person-To-Person payments (P2P payments). These types of transfers took a few days to reach the accounts of the payees. In order to challenge this traditional system (SEPA Credit Transfer for example), the European Central Bank (ECB) has introduced the SEPA (Single Euro Payments Area) Instant Credit Transfer (SEPA SCT Inst).
What is Instant Payment?
Depending on the geographical region, we can distinguish three official systems for Instant Payment, as described below:
- Instant payment for SEPA (IP): payments are processed in less than 10 seconds and the funds are directly transferred from the bank of the payer to the bank of the payee.
- UK Faster Payment System (FPS): it was introduced in the United Kingdom in 2018 by the leading retail payment authority. Payments are processed in GBP, and completed during 2 hours.
- Real-Time Payment for the US (RTP): this system of payments was introduced in 2017, and is available for all payment providers. Payments are processed instantaneously in USD.
According to European Central Bank (ECB), Instant Payments can be defined as “credit transfers that make funds available in a payee’s account within ten seconds of a payment order being made”.
It is a real-time payment based on a real technological revolution in the sense that the money is made available almost instantaneously in the recipient’s account. As it is a SEPA transfer, it should be possible not only in European countries using Euro, but in every European country, even those which are not using Euro.
What are the characteristics of Instant Payment?
Payment made by SEPA Instant Credit Transfer (SCT Inst) is near real-time, and has the following characteristics:
- The payment is processed in euros
- The maximum amount of the transaction is 15,000 euros.
- The payment is processed within 10 seconds or less
- The transaction is Irrevocable, and the system is available 24/7/365
- The interbank mechanisms of clearing and settlement are Independent
What are Instant Payment actors?
As a pan-European project, SEPA Instant Payment solutions are supposed to be either developed at the pan-European level or, be interoperable with other solutions if developed at the national level. Instant payment solutions consist of the following layers:
- Layer of end-user solutions developed in the markets (e.g. for P2P mobile payments)
- Layer of the scheme (underlying payment schemes)
- Layer of clearing (arrangements for the clearing of transactions between PSPs)
- Layer of settlement (arrangements for settlement of transactions between PSPs)
What are the benefits of instant payment?
SEPA Instant Credit Transfer has a lot of advantages for those who are using this service:
- Sending and receiving instantly electronic payments in euro anytime and anywhere in Europe
- Reducing the risk for e-merchants of not getting paid or not getting paid at the good timing
- Improving cash flow and making management of funds for Business-To-Business
- Financial inclusion to all European Union citizens by the possibility to use this system