White paper: EU Instant Payments and PSD2

Europeans can expect great things in 2018, with the launch of a new European payment system available to all account holders in Europe. Money transfers will be possible 365 days a year and will be able to be completed from anywhere in Europe within a maximum of 10 seconds. Instant Payments should be available not only via online banking but also at POS in retail outlets, online and via smartphone apps. Data protection is also guaranteed. All in all, the future looks extremely promising.

Instant Payments do at least have potential

  • At the beginning of 2016, the total population of the EU was estimated to be about 510 million, including about 339.7 million inhabitants of the euro zone.

  • 47% of all transactions are card payments, 26% bank transfers and 21% bank debits.

  • Nearly 51 billion transactions worth 41.1 trillion euros were handled via bulk payment systems in the EU3

  • The number of cashless payments in the EU increased by 8.5% in 2015 compared with the previous year, to 112.1 billion euros.

Challenges & unanswered questions

Money in the account instantly? It sounds great at first. However, Instant Payments present enormous demands on the banking system, merchants and the way they are interconnected. For Instant Payments, settlement has to happen straight away and the banks’ IT systems will need to be completely updated, which will swallow up vast amounts of money.

Although Instant Payments are seen as the next big step in payment processing, there are nonetheless still a few areas of criticism. First of all, Instant Payments – as currently conceived – are applicable only to purely intra-European payments. Moreover, instant debiting has not only its champions but also its critics, who bemoan the lack of a credit function.

White paper: An overview

  1. Introduction
  2. What are Instant Payments?
  3. Who initiated Instant Payments?
  4. Expectations of Instant Payments
    ... Retailers and merchants
    ... Consumers
  5. ECB
  6. Possible disadvantages of Instant Payments
  7. Developments and descriptions
  8. Costs to merchants
  9. Background & standards for Instant Payments
  10. Challenges and unanswered questions
  11. Prospect
  12. Fazit
  13. History of PSD and PSD2