Taking the stress out of delivering SEPA’s new Instant Payments Mandate

Jolanda Schekermans, Head of Product – Europe, Form3


It is a truth universally acknowledged that to move a market towards adoption, regulation is the magic word. The EU has now taken this first step in making Euro instant payments universally available by requiring Payment Service Processors (PSPs) in the Eurozone to offer SEPA instant payments. This will impact both existing providers who will need to amend their current fee structures, and those needing to take steps to provide instant payments as a new service.

For many credit institutions payments have become a commodity and instant payments require high adaptability of their back offices that are constrained to batch-based processing. Change is expensive and with a lot of other mandatory changes in the pipeline, not everyone is ready for such an overhaul. This has led to an unlevel playing field of charging instant payments as a ‘special service’ for some or all of their customer base, to try and recover some of the cost of the service.

At the same time, the expectation of speed and instant delivery is now ubiquitous in society as a whole. In the early days of Amazon the marvel was that it got delivered to your door within a week, we now get annoyed if a delivery is an hour late. In the financial world, consumers want to see their money move and do not expect to pay interest on that.

Mandated adoption of SEPA Instant will have high impact on existing SEPA Instant providers not just on those needing to take steps to provide instant payments as a new service.

Challenges and Opportunities

In the SEPA area, most if not all larger credit institutions are supporting in some capacity SEPA Instant already. These institutions will be faced with the need to adjust their processes and back offices (further) to accommodate for the screening requirements at speed, optimise for loss of fees that they may have been asking for as compensation, and consider what enhancements they could possibly offer and charge for. The mandate effectively completely commoditizes Instant payments which makes the service itself hard to extract value from.

For those that have yet to embrace instant payments, they face the same challenges in their back offices and additionally some that others already went through like how to deal with a prefunded system in their net or gross settlement-based treasury processes. They may also consider how they wish to participate; does their customer base warrant a direct participation or are there other ways to fulfill the requirement of the mandate more appropriately? This could take the form of a traditional ‘indirect’ model or alternatively access could be achieved through a ‘Direct Non-settling Participation’ (DNSP) model, that would provide a direct arrangement to fully embrace the real time nature of SEPA Instant.

It also provides a great opportunity for innovation and enhanced services for those that provide screening services. Current solutions in general take too much time to complete a screening, on account lists and transactions, to go alongside with a real instant payments service of which the expectation is that over time service-level agreements (SLAs) will only become more stringent. The same is true for those that specialise in authorized push payment (APP) fraud prevention. We see from mature instant markets that APP fraud is on the rise even when services like Confirmation of Payee are in place like the UK. The SEPA market is only just getting started on both these instant payments challenges. And best in class solutions will be needed to build trust and reliability that full adoption of instant payments needs.

The best approach to the new Mandate

Existing SEPA Instant providers should look at the new regulation as an opportunity to review their back office capabilities and drive efficiency. Such analysis, will in my view, lead to more outsourcing of commoditized processes. Those that want to handle the payments themselves are looking at a substantial overhaul. Legacy, on-premise  infrastructure and multi-layered back office processes are not geared up to handle increased SEPA Instant volumes at speed and to scale over time. Moving to the cloud native infrastructure in our view is essential and will play a big part in greatly reducing cost and risk. To really be future proofed and ahead of the regulator, multi-cloud cloud provision will be the crème de la crème amongst those services.

The time to act is now

Although the finalisation date is yet unknown things look to be proceeding quickly. Once the regulation gets through, financial institutions will have 6 months to be ready to receive SEPA Instant payments and send SEPA Instant payments 6 months after that. That is likely to bring us to the end 2024 at the earliest for both implementations. Whether you are a new joiner or existing participant looking for reductions to the cost of processing, making all the necessary arrangements is a lengthy process, so the time to evaluate the impact and consider your strategy is now.


Mandated SEPA Instant will ensure uptake across the market and make Instant the new normal. Ensuring the security of instant payments makes up a large part of the EU regulations, essential to the trust in market, innovation to handle screening at speed should come from the expert providers.

The regulation will cause high impact with both existing SEPA Instant providers and newcomers to the market. Considerations for outsourcing and minimising integration points for processing payments may be the key to efficiency and reducing risks.

Change is constant and significant technical debt is accumulating, payments are changing beyond recognition, considering new solutions for new and old problems, whether it be in how you access systems or a cloud infrastructure strategy, needs to be part of the continuous improvement mindset.

If done right, and the market can build trust and solve for the new type screening, in what is one of the most complex payments markets out there, SEPA can become an example of best next generation instant payments to for other regions, key also to keeping interoperability.


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