EU Council and Parliament reached an agreement that benefits payment service providers

The European Parliament and European Council have agreed the access to central bank payment rails by non-bank financial institutions and stablecoin issuers and the mandatory provision of instant credit transfers in euros.

Details of the agreement

According to the new rules, any payment service providers, like banks, that can offer standard credit transfers in EUR will also have to offer the service of receiving and sending instant payments in EUR without charging additional fees. Another part of the agreement will see payment institutions not classified as banks receive direct access to the payment systems that were thus far been reserved for the banks only.

This includes entities like e-money institutions and future regulated stablecoin issuers. Mep, Michael Hoogeveen commented on the deal, stating that the RU payment systems will become more competitive as a whole because of the agreement. Hoogeveen added that the Parliament’s negotiating team also managed to ensure that fintech companies could access the European Central Bank’s payment infrastructure under certain conditions. Even so, this should ensure they will not have to pay extra fees to the banks to provide the service.

The Parliament’s and the Council’s statement noted that the rules will further improve the strategic autonomy of Europe’s financial and economic sectors by reducing excessive reliance on third-country financial infrastructures and institutions.

The move will make instant payments in EUR universally available and more affordable. Further, the move will also increase trust due to the fact that providers will be obligated to verify the match between the name of the beneficiary provided by the payer and IBAN.

The agreement is good news, but the implementation will be challenging

Regarding the integration, the Council said that the rules will come into force in two separate stages. There will be a short transition period in the euro area, while the one in EEA countries will be somewhat longer.

RedCompass Labs’ head of strategy advisory, Kjeld Herreman, stated that the legislation seems like good news for European businesses and consumers. However, he is concerned about the technical implementation, which he views as a massive challenge for the banks. After considering the terms, he believes that the banks will have to rapidly assess their digital capabilities and work with their counterparts and service providers to address any upcoming challenges quickly.

“Timelines for this move are extremely ambitious, as banks must also enable file-based instant payments without surcharge for their business clients. The result of this is that even payment service providers that are already capable of processing instant payments will massively need to scale their throughput,” he noted.