EU Council Backs Instant Cross Border Payments

Instant payments, integrated — and pan-European in scope.

This week, the Council of the European Union backed the formation of an integrated and instant system for retail payments, interoperable across all of the European Union’s member states.

The Council noted in a release that the “EU member states want to make it easier for consumers to pay in shops, and to make e-commerce transactions widely available, convenient and safe across the EU.”

To that end, the Council adopted the conclusions tied to a retail payments strategy that was presented back in September 2020.

“The Council also highlights the many challenges to be taken into account when further developing and regulating the market, such as financial inclusion, security and consumer protection, data protection and anti‑money laundering aspects,” according to the release.

Delving into the Council's conclusions, the Single Euro Payment Area (SEPA) has helped harmonize retail payments legislation. The emergence of new payments solutions “entails a number of policy challenges for the EU, in terms of regulation and supervision, particularly in terms of security, consumer protection, competition, data protection, anti-money laundering and combating the financing of terrorism.”  Consumer protection and “adequately priced solutions” are “important drivers in the adoption of payment solutions.”

The development of such systems (and with it, instant payments) come against the backdrop of rapid expansion of global remittances, said the Council. Yet most domestic payment solutions that are based on cards or instant payments do not work across borders — “which can constitute an obstacle for cross-border payments in shops and e-commerce.”  Thus, systems are fragmented, and  “the development of a clear vision and the placing of future actions under a single, coherent and overarching policy framework are of crucial importance,” said the Council.

In its conclusions, the Council also said that legislative action might be needed “to promote adherence” to the SEPA Instant Credit Transfer scheme and to its additional functionalities (e.g., requests to pay, QR codes and proxy lookup services).

The Council further stated in its conclusions that it supports efforts to foster the development of pan-European solutions, “notably by addressing the challenges that actors wishing to offer pan-European solutions may face and removing disproportionate obstacles for uptake by merchants and consumers of instant and other digital payments at the point of interaction.”

The Council said that it is encouraging the preparation of a study on the level of digital payments acceptance ahead of any legislative proposal development. Also, there are “potential benefits” tied to central bank digital currencies, according to the conclusions, while acknowledging there could be “potential adverse effects, in particular on business models of financial intermediaries and other services’ providers, financial stability, monetary policy, data protection and privacy.”

The findings also said that the Council “welcomes”  a comprehensive review of the Payment Services Directive 2 (known as PSD2).  Such a review would examine “the appropriateness of the scope of application (including as regards technical service providers), and the need for further clarification of existing concepts and rules.”