The payments landscape stands at a crossroads, offering users an ever-expanding array of channels and currencies, with data flowing more openly than ever, and infrastructure layers becoming increasingly sophisticated. Instant payments represent an excellent example of this evolution: launched in the European Union in 2017 with the European Payments Council’s instant payment scheme, it facilitates domestic and cross-border payments in euros among participating payment service providers (PSPs) within the Single Euro Payments Area. Instant payments, heralded for enhanced consumer convenience and merchant cost-effectiveness, also serve to offer more choice to European users and card rails for Europe’s retail payments.

Fast forward a few years, only a small proportion of credit transfers in the euro area are instant. In response to this disappointing status compared to the initial ambitions, the European Commission introduced the Instant Payments Regulation proposal in October 2022, aiming to make instant euro payments the “new normal.” This regulation was adopted a year later, making instant payments a requirement for all payment service providers.

While the Luxembourg Bankers’ Association (ABBL) supports the overall objective of the European Commission, it expressed concerns about the proposal’s potential burden on smaller organisations. It also flagged the significant change required from banks, particularly those for which instant payments are a less obvious value proposition, given their customer segments, such as private and investment banks. Additionally, ABBL raised the importance of managing potential money laundering and terrorism financing risks.

During debates in the European Parliament, the ABBL advocated for a revised implementation timetable, especially regarding the obligation for banks to perform free IBAN/name checks. The challenge is indeed real, as there is no relevant database in Luxembourg or any other tool in the EU, meaning time is needed for development. Furthermore, the ABBL called for a reasonable exclusion for transactions involving high-risk factors listed in the AML Directive, emphasising the imperative to perform due diligence requirements.

As the implementation timetable is now specified, the Instant Payments Task Force of the ABBL’s Payment Cluster is intensifying its efforts to support approximately 60 member companies in adapting to these new measures. ABBL recently organised a conference, attended by nearly 200 participants, where Luxembourg’s central bank (BCL) and the Luxembourg Financial Sector Supervisory Commission (CSSF) provided welcomed clarifications on the European Commission’s text. It also allowed participants to voice concerns about remaining inconsistencies and provide tangible examples of the significant challenges ahead: Indeed, questions still abound, from handling bulk orders to multi-currency payments, adapting fraud detection processes within the tight timeframe, or the need for a national or international database to recognise payees. Thanks to the open collaboration, instant payments are now within reach in Luxembourg.

Claire Alexandre is head of Luxembourg Bankers’ Association (ABBL) Payments Cluster and a senior director of government relations at Paypal.