Instant payment
Instant payment (sometimes referred to as real-time payment or faster payment) is a method of electronic funds transfer, allowing for almost immediate transfer of money between bank accounts. This was in contrast to the previous transfer times of one to three business days that had been in place until the mid-2010s.
Overview
Instant payment (sometimes referred to as real-time payment or faster payment) is a method of electronic funds transfer, allowing for almost immediate transfer of money between bank accounts. This was in contrast to the previous transfer times of one to three business days that had been in place until the mid-2010s. Since the mid-2010s many countries have implemented instant payment systems that speed up the transfer between bank accounts in response to customer demand for faster transactions.
The Euro Retail Payments Board (ERPB) in 2018 defined instant payments as: Electronic retail payment solutions available 24/7/365 and resulting in the immediate or close-to-immediate interbank clearing of the transaction and crediting of the payee’s account with confirmation to the payer (within seconds of payment initiation).
History
Originally clearing of payments was based on the cheque clearing cycle that required physical cheques to be exchanged by banks at clearing houses for payments to be made between bank accounts. When electronic payments entered the banking systems from the 1970s onwards, the same timeframes and processes were used to settle these electronic payments. The growth of e-commerce since the 2000s has caused a change in people's spending patterns and expectations. Shopping is no longer confined to regular business hours, creating new challenges for funds transfers. Similarly, merchants require faster and more reliable money transfer systems to keep up with consumers' demands. Traditional electronic payments like bank transfers, that perform the electronic funds transfers within a few business days, are not in line with user expectations. In 2024, EU adopted Instant Payment Regulation, aiming to accelerate instant payments in Europe. For EU member states operating in euro it partially took effect in January 2025, for non-euro member states it will partially take effect in January 2027. This regulation includes requirements to send and receive transfers within 10 seconds (SEPA Instant Credit Transfer), as well as to implement the Verification of Payee service. The Verification of Payee allows payment service providers (PSPs) to verify the IBAN and the name of the payee as given by the payer. It will help to reduce scams and incorrect transfers. The regulation also allowed non-bank financial institutions access central bank-operated payment systems like TARGET. This opened an access to several SEPA services for fintechs and neobanks in Europe.
See also
Clearing (finance) European Central Bank EBA Clearing SWIFT for NPP Settlement (finance)
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