European Banks Grapple with SEPA Instant Payment Deadline: 58% Deem Unrealistic

European Banks Grapple with SEPA Instant Payment Deadline: 58% Deem Unrealistic

Time Stamp: March 27, 2024 12:55 PM
Source Node: 2528032

The majority of European banks are facing a
difficult situation regarding the timelines for implementing the Single European Payments Area (SEPA) instant payments set by the EU. A report by RedCompass Labs revealed that 58% of 200 senior payment
professionals surveyed find the timelines unrealistic.

According to the survey, there is a looming uncertainty over the readiness of
banks to facilitate SEPA instant payments. One of the key findings of the
research is that European banks are underestimating the volume of payments they
need to process per second.

Instant payments accelerate the movement of money
between businesses and individuals. While the average target is between 101 and 300
payments per second, experts suggest that aiming for at least 1,000 payments
per second is imperative, considering the magnitude of bulk payment files.

Source: RedCompass Labs

The transition towards SEPA instant payments is affected by the challenges faced by the European banks. The top five hurdles include adapting
customer channels, implementing KYC and sanctions screening provisions, scaling
throughput, creating value-added offerings, and ensuring 24/7 availability.

Tom Hewson, the Partner and CEO at RedCompass Labs,
mentioned: “Europe
is taking a leap forward with new legislation that will make around-the-clock
instant payments the new normal. This is an exciting development, but the deadlines
are tight. Banks, already extremely stretched delivering the migration to ISO 20022,
must be able to send and receive instant payments by the end of 2025. That’s a
big ask.”

Challenges

Despite these challenges, there’s a silver lining for
European banks. A significant 77% of the respondents in the survey believe that the benefits of instant payments
outweigh the costs. Moreover, there’s a growing demand for instant payment
products and services, with 89% of respondents acknowledging the trend.

Source: RedCompass Labs

The adoption of new rules for instant Euro transfers
by MEPs marks a significant milestone in Europe’s journey towards instant
payments. The legislation aims to promote SEPA integration, strengthen the
Euro’s international role, and reduce reliance on foreign payment schemes.

Hewson added: “As a bank, your internal systems
must be ready to handle the increased volume and speed of transactions. In the
past, we talked about hundreds of transactions per second for bank-to-bank
systems. Currently, it is multiples of thousands per second. You will need to cover
downtime and system outages while recording and synchronizing data accurately,
in real-time, across various parts of the payment system for it to be reliable.”

The majority of European banks are facing a
difficult situation regarding the timelines for implementing the Single European Payments Area (SEPA) instant payments set by the EU. A report by RedCompass Labs revealed that 58% of 200 senior payment
professionals surveyed find the timelines unrealistic.

According to the survey, there is a looming uncertainty over the readiness of
banks to facilitate SEPA instant payments. One of the key findings of the
research is that European banks are underestimating the volume of payments they
need to process per second.

Instant payments accelerate the movement of money
between businesses and individuals. While the average target is between 101 and 300
payments per second, experts suggest that aiming for at least 1,000 payments
per second is imperative, considering the magnitude of bulk payment files.

Source: RedCompass Labs

The transition towards SEPA instant payments is affected by the challenges faced by the European banks. The top five hurdles include adapting
customer channels, implementing KYC and sanctions screening provisions, scaling
throughput, creating value-added offerings, and ensuring 24/7 availability.

Tom Hewson, the Partner and CEO at RedCompass Labs,
mentioned: “Europe
is taking a leap forward with new legislation that will make around-the-clock
instant payments the new normal. This is an exciting development, but the deadlines
are tight. Banks, already extremely stretched delivering the migration to ISO 20022,
must be able to send and receive instant payments by the end of 2025. That’s a
big ask.”

Challenges

Despite these challenges, there’s a silver lining for
European banks. A significant 77% of the respondents in the survey believe that the benefits of instant payments
outweigh the costs. Moreover, there’s a growing demand for instant payment
products and services, with 89% of respondents acknowledging the trend.

Source: RedCompass Labs

The adoption of new rules for instant Euro transfers
by MEPs marks a significant milestone in Europe’s journey towards instant
payments. The legislation aims to promote SEPA integration, strengthen the
Euro’s international role, and reduce reliance on foreign payment schemes.

Hewson added: “As a bank, your internal systems
must be ready to handle the increased volume and speed of transactions. In the
past, we talked about hundreds of transactions per second for bank-to-bank
systems. Currently, it is multiples of thousands per second. You will need to cover
downtime and system outages while recording and synchronizing data accurately,
in real-time, across various parts of the payment system for it to be reliable.”

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