Regulatory advisory services for instant payments

Payment services providers (PSPs) such as banks are expected to undergo significant transformations as a result of the entry into force of the Regulation (EU) 2024/886 on instant credit transfers in euro (so called “Instant Payments Regulation”).

The new regulation aims at making instant payments fully available in euro to consumers and businesses in the EU and in EEA countries, allowing transfer of funds within ten seconds 24/7 and 365 days per year.

PSPs which provide standard credit transfers in euro, will be required to offer the service of sending and receiving instant payments in euro. The charges that apply (if any) must not be higher than the charges that apply for standard credit transfers.

Under the new rules, instant payment providers will need to verify that the beneficiary’s IBAN and name match in order to alert the payer to possible mistakes or fraud before a transaction is made. This requirement will apply to regular transfers too.

The new rules will come into force after a transition period that will be faster in the euro area and longer in the non-euro area, that needs more time to adjust.

The impact of instant payment regulation on banks and other PSPs in Luxembourg can be remarkable, including modernisation of the payments infrastructure, enhancements to transactions processing, and improvements of the overall customer experience.

PSPs operating in Luxembourg will need to ensure compliance with local and European Union (EU) regulations governing instant payments. This may involve screening of existing processes, adherence to technical standards, and meeting reporting requirements set forth by regulatory authorities.

PSPs would need to update their systems and processes to support instant payments. This might involve investing in new technology, updating existing infrastructure, and integrating with payment networks that support instant payments.

While instant credit transfers may generate additional transaction volume and fee income, they may also face pressure on traditional revenue streams, such as fees for slower payment services. PSPs will need to carefully assess the impact on their revenue models and adjust accordingly.

Instant payments introduce new risks, such as fraud and operational risks associated with real-time processing. PSPs will need to enhance their risk management frameworks to address these challenges and ensure the security and reliability of instant payment systems.

Instant payment regulations are driven by the demand for faster and more convenient payment options from consumers and businesses. PSPs will need to meet these expectations to remain competitive. This may involve offering new services, such as real-time account-to-account transfers and instant settlement of e-commerce transactions.

In conclusion, while the new rules present challenges for banks and other PSPs in Luxembourg, they also offer opportunities for innovation and growth in the rapidly evolving payments landscape. Adapting to these changes effectively will be crucial for maintaining competitiveness and meeting the evolving needs of customers.

How PwC can help clients succeed

Team up approach to ensure that internal framework, policies, procedures, systems are scrutinised and aligned with organisational and regulatory requirements.

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Cécile Liégeois

Clients & Markets Leader, PwC Luxembourg

Tel: +325 621 332 245

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