The European Union (EU) has made a major advancement in transforming the financial sector with the introduction of the Instant Payments Regulation (Regulation (EU) 2024/886), published on 19th March 2024. This regulation requires all banks and financial institutions within the EU to offer instant payments to customers 24/7/365. It officially came into force on 8th April 2024, with the first set of obligations for payment service providers (PSPs) to be enforced by 9th January 2025. These changes are set to revolutionise the way individuals and businesses conduct transactions, while also accelerating digital innovation in the payments industry.
According to the European Commission, traditional credit transfers and cheques ‘lock’ almost 200 billion euros in the financial system on any given day. Instant payments unlock these funds, such that these become instantly available for economic use, either for consumption or for investment, thereby contributing to growth.
While the benefits of instant payments are clear, the implementation of this regulation brings with it several challenges for banks and payment service providers (PSPs):
Infrastructure Investment and Transformation: Banks face the challenge of implementing cost-effective platforms, such as transitioning to cloud-based models, to offer instant payment services while staying competitive. They must decide whether to upgrade existing systems, integrate new technologies, or develop entirely new processes. This transformation requires significant infrastructure investment, all while managing regulatory deadlines and customer demands.
Operational Complexity and Continuous Uptime: With instant payments demanding 24/7/365 availability, banks need systems capable of handling high transaction volumes without downtime. Ensuring continuous operational functionality poses organisational and technical challenges, requiring careful planning and substantial investment in systems to avoid delays or interruptions.
Increased Competition: The regulation allows fintech startups and non-traditional financial players to enter the market, intensifying competition. To stand out, banks must differentiate themselves by developing unique value propositions, strengthening customer loyalty, and enhancing brand recognition.
Customer Education and Expectations: As new payment methods emerge, so do new customer expectations. Banks must educate customers on instant payments, address security concerns, and ensure they understand how the system works. Failing to meet these expectations could give competitors with better customer journeys a competitive advantage.
Scalability and Connectivity: The regulation raises questions about the scalability and connectivity of banks’ systems. To meet increased regulatory demands, banks will need to thoroughly assess their business models and seek partnerships with experienced industry players to deliver the required services.
Join industry leaders at the 19th NextGen Payments & RegTech Forum on 6-7 November 2024 at the Four Seasons Hotel in Limassol, Cyprus, to explore the emerging trends, pressing challenges, and innovative solutions in the payments and regtech industry!
Connect with top-tier organisations that offer the best innovative solutions for your organisation, featuring our esteemed sponsors: BPC, Premier Financial Services Limited, Cloudflare, ComplyRadar, Infocredit Group Ltd, HighRadius and Moneygate Solutions Limited.
To register and access the agenda: https://bit.ly/47J6SIn
For more information on registration, please contact info@qubevents.com
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