For five years now, it has been technically possible in Europe to transfer money within seconds. However, most customers do not use this because of the additional costs. The EU Commission wants this to change.
Brussels is trying hard, but paying in seconds is still a rarity five years after its introduction in Europe. About 13 percent of all euro-denominated customer transfers in the Sepa area are executed in real time. The fact that the EU Commission wants banks and savings banks to set guidelines for the pricing of so-called instant payments in order to promote this payment method does not go down well with Germany’s banking associations.
Since November 21, 2017, fast transfers known as “SCT Inst” have been possible in Europe. The EU Commission had set itself the goal of making such transfers from account to account within seconds the standard in the Union by the end of 2021. The “Single Euro Payments Area” (SEPA) comprises the 27 EU countries as well as Iceland, Liechtenstein, Norway, Switzerland, Monaco, San Marino, Andorra, Vatican City and Great Britain.
A third of the banks do not offer instant payments
However, according to the latest information from the EU Commission, around a third of the banks in the EU do not yet offer instant payments. And most private customers only use the transfer, which is usually subject to a fee, in exceptional cases. A possible application is the private sale of a car. If such a transaction is processed using real-time payment, the seller can check directly whether the money has arrived in his account. With other electronic payment methods, a car seller must at least take into account the risk that the buyer will not pay.
In order to help fast transfers to achieve a breakthrough, Brussels now wants to enforce that real-time payments in euros should not be more expensive for bank customers than standard transfers, which are usually free. In addition, all credit institutions are to be obliged to offer fast transfers at all times. Normal transfers usually take one working day, real-time payments up to ten seconds.
The ability to send and receive money instantly is particularly important at a time when household and business bills are rising and every penny counts, argues Financial Markets Commissioner Mairead McGuinness. The EU states and the European Parliament now have to negotiate the legislative proposal presented by the EU Commission at the end of October. Changes are possible in this process.
German banking industry: Price regulation “not appropriate”
“The price regulation proposed by the EU Commission is not appropriate against the background of the wide range of offers on the market,” counters the German banking industry. “In addition, the use of real-time payments and the development of offers based on their infrastructure is still in its infancy in Europe, albeit with high growth rates and equally high potential. Experience has shown that it takes time for technological innovations to take hold on both the supply and the customer side prevail and trigger positive economic effects through broad acceptance,” argues the umbrella organization of the five major banking associations in Germany.
When the Italian Unicredit group Hypovereinsbank tested the real-time payment on November 21, 2017, there was great euphoria. Back then, HVB sent money from Germany to Italy within 2.5 seconds. “The introduction of instant payments five years ago was a milestone,” sums up Gerhard Bystricky, who is responsible for product development in payment transactions at HVB and was there at the time.
Real-time deals up 15 percent
“Real-time payments have meanwhile established themselves on the market. Since we integrated the offer free of charge in all of our current account models, private customers are also using this method for transfers much more frequently,” says Bystricky. The proportion of transactions that are carried out in real time has risen at HVB from 10 percent to around 15 percent within a year. “We process about half of our real-time payments within one second, 95 percent within five seconds,” says Bystricky.
The HVB developer hopes that gaps in the European instant payment map will soon be closed. “There is still room for improvement in terms of coverage in Europe,” says Bystricky. “Accessibility is another key to the success of this technology.”
Bundesbank board member Burkhard Balz has been promoting instant payments for years. Balz said recently at a conference in Frankfurt that he considers objections that payments do not have to be processed in real time, at least as a rule, to be backwards. “You miss the chance to shape the future.” Balz affirmed: “A rapid expansion of real-time payments can help to overcome dependencies and strengthen Europe’s autonomy.”