New EU rules on SEPA instant transfers

The European Parliament passed a regulation mandating that transfers must occur within ten seconds. Learn how financial institutions are adapting.

Sarah Wachter
February 12, 2024

Regulation often paves the way to innovation, pushing fintech companies to build advancements that raise standards for the whole industry. A perfect example of this is the new set of EU rules on SEPA instant transfers.

Instant transfers used to be a nice-to-have. But thanks to the recent overhaul in regulation, they will soon become the new norm. People expect speed!

Swan anticipated this change and built up SEPA instant transfers that you can easily embed into your product.

What are SEPA instant transfers?

Credit transfers used to be bound to the business hours of the payment service provider, so it could take longer for funds to appear. Then, in 2017, the European Payments Council introduced a system for facilitating instant transfers, through its “SEPA Instant Credit Transfer Scheme” (SCT Inst).

The scheme has the following three key characteristics:

  • A target maximum execution time of 10 seconds
  • A maximum amount of 100,000.00 euros per transaction
  • Availability 24/7/365 (including during inter-bank holidays)

More details available in Swan’s Docs.

Instant transfers provide much smoother user experiences, but not all payment service providers were quick to adopt them, motivating the creation of new regulations.

The European Parliament passed a regulation mandating that transfers must occur within ten seconds.

The latest Single Euro Payments Area (SEPA) regulations aim to remove the barriers blocking the adoption of instant transfers. Instant transfers will now become the norm, setting a new benchmark for speed,  efficiency, and security.

Key changes include:

  • Mandatory payer's confirmation:  Sender institutions must rigorously confirm the match between IBAN and beneficiary names before initiating transfers—an important measure for not only error prevention but also fraud.
  • Cost parity: Instant SEPA services will be mandated to be provided at the same cost as regular SEPA transactions, underlining a commitment to fairness and eliminating any potential for unjust pricing.
  • Universal acceptance: All banks and every payment service provider (PSPs) are now obliged to support SEPA Instant, promoting widespread accessibility and adoption.

This legislation was overwhelmingly approved (599 votes to 7, with 35 abstentions) and will be implemented within 12 months after its publication.

Swan's upcoming feature, IBAN verification, will add an extra level of security. When you’re sending money to someone for the first time, it’s normal to be nervous about whether you’ve entered all the right information with no mistakes. With IBAN verification, you can immediately see if the account name and IBAN match.

How financial institutions are adapting

If you work with financial institutions (like Swan) or are considering it, here’s what to look for to make sure they’re already adapting to the new reality of this regulatory framework:

  • Real-time fraud checks: Institutions are gearing up for robust real-time fraud detection mechanisms, underscoring a commitment to security for instant transfers.
  • Scheme Integration: The integration with a new scheme necessitates substantial investments in infrastructure and technology, ensuring seamless adoption and operation.
  • Better confirmation processes: The mandatory IBAN and beneficiary name match confirmation means institutions must invest in advanced systems to validate payer information, reinforcing the integrity of every transaction.
  • Intra-Day Ledger Updates: A paradigm shift for institutions used to daily batch operations, intra-day ledgers will establish new settlement rules. In real-time payment systems, banks settle funds between each other during the day. This means the system calculates how much each bank owes or is owed. At the end of a set time period, the banks settle these amounts through accounts they have with the central bank.

Embedding instant transfers with Swan

Swan is dedicated to anticipating the embedded banking needs of companies across Europe. We love to see European regulation supporting a landscape where instant transfers are the norm! People today expect speed, security, and accessibility from their payments.

With Swan’s embedded banking platform, any company in Europe can easily embed instant transfers in their own product to give their users the seamless payment experience they expect.

Check out our Docs to learn how to embed instant transfers into your product.

Chat with a fintech expert to explore how you could unlock the potential of your product by embedding banking features like instant SEPA transfers!

Sarah Wachter
February 12, 2024
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