We are all familiar with the 10-second countdown to the new year. Imagine receiving money from a friend in a different country that clears and settles in that same amount of time. Cross-border payments may typically take days to clear and settle. The European Union (EU) has made steps to change this. As of January 9, 2025, banks and payment service providers (PSPs) located in euro area member states must be set up to receive instant payments, while they have until October 9, 2025, to implement send capabilities. By 2027, all Single Euro Payments Area (SEPA) countries must offer instant payments. SEPA includes more than 30 countries located both outside and inside the European Union.
The Instant Payments Regulation
(IPR) requirements are intended to increase the adoption of the SEPA instant credit transfer, which launched eight years ago:
The efforts of the European payments industry have not proven sufficient to ensure a high uptake of instant credit transfers in euro at Union level. Only a widespread and rapid increase in such uptake could unlock the full-scale network effects of instant credit transfers in euro, leading to benefits and economic efficiency gains for payment service users and PSPs, reduced market concentration, and increased competition and choice of electronic payments, in particular for cross-border payments at the point of interaction. (Resolution 2)
In contrast, both US instant payment systems, FedNow and Real-Time Payments (RTP) from The Clearing House (TCH), are currently used to make domestic payments only. In addition, the US does not have a regulation that mandates payment providers to offer instant payments. While there has been growth in instant payment usage, the US still has a big hill to climb. TCH reported that RTP network payment value was $246 billion in 2024—compared to the roughly $2 trillion in payments that TCH clears each day for all products. At the writing of this post, TCH lists that 676 financial institutions are connected to the RTP network, and the Fed lists 1196 participants on the FedNow network.
Even though the largest US financial institutions, representing 70 percent of US bank accounts, can access instant payments, we do not have widespread adoption yet. The EU regulation is set to affect that, since it includes transactions that may originate in US dollars but convert to euro or vice versa. Either way, US payment providers, will want to take note of the new regulation.
The IPR timeline offers a staggered approach with the most stringent deadlines for euro area member states. Non-euro area member states have until 2027 to comply with both the receive and send mandates.
Some requirements may be difficult for legacy systems to handle:
- The payer must be assured via verification of payee that the correct person or entity is being paid.
- Users of instant payments must be checked daily against the European Union sanctions list and others as applicable.
- After verification and confirmation of payee, the payment must be received in 10 seconds. If not, the transaction must be cancelled, and may incur penalties.
Connecting to instant payments requires significant infrastructure upgrades, operational adjustments, and regulatory compliance. As with other landmark European legislation, the IPR may affect frameworks for global financial regulation. US firms operating in the EU will need to understand the IPR and develop strategies for implementation. It begs the question: Will the European Union's Instant Payments Regulation force the hand of US PSPs?
For updated question and answers, see the “clarifications of requirements” document on the European Commission's website.
By Lali Shaffer, director, Atlanta Fed Payments Forum