Two misfortunes jeopardize the EU payment ecosystem

In the European banking environment, customers increasingly expect real-time transactions, transparent exchange rates and reasonable transfer fees. In practice, however, the way banks operate does not always match customer demand.

When it comes to intra-European payments, two obstacles are currently hampering the fast, free and open movement of money on the continent, notably the slow roll-out of the bank transfer system known as SEPA Instant or SEPA Instant Credit Transfer (SCT Inst), meaning to enable real-time cross-border payments in the 36 countries of the Single European Payments Area (SEPA).

Yet despite the promise of the fast and transparent EU bank transfer scheme, access to SEPA instant transfers remains low, with the proportion of banks offering both SEPA credit and instant SEPA being as low as 5% in Ireland and barely 3% in Denmark.

Read more: Instant payments and data open up contextual banking opportunities for consumers

According to Steve Naudé, Product Manager at Wise Platform, another issue that continues to undermine the success of SEPA Instant is the way many banks add an additional surcharge for customers who wish to use the service, making it an even more option. more expensive than the non-instant alternative.

“All institutions should offer this to their clients, and it should be offered at no additional cost,” he told PYMNTS in an interview.

Another issue that has limited SEPA’s real-time payment system has been the lack of interoperability between the two underlying payment rails, TARGET Instant Payment Settlement (TIPS) and the RT1 system.

TIPS is backed by the European Central Bank with the aim of facilitating 24/7 real-time payments between eurozone bank accounts, while RT1 is an alternative instant payment protocol controlled by EBA Clearing , a European private infrastructure provider wholly owned by a consortium of the continent’s largest banks.

More on this: ECB’s Panetta urges businesses to adopt EU instant payment solutions

Although steps have been taken to increase interoperability between the two systems, some banks currently only use TIPS, while others only accept RT1.

That said, it’s not all bad news. The use of TIPS continues to grow and since May this year it has been able to settle transactions in Swedish Krona as well as Euros. The market and governments are putting significant pressure on banks to get their act together when it comes to instant SEPA accessibility.

Discrimination IBAN

Another problem affecting the movement of money across borders is the prevalence of discrimination by international bank account number (IBAN) – when a bank or business does not accept an IBAN for euro payments or direct debits automatic because it is not from the same country they are based in – across the region.

EU regulations require banks and businesses to accept payments from all SEPA member states, but clearly many institutions refuse to comply.

“There are laws in Europe that prohibit IBAN discrimination” and organizations must accept IBANs from different SEPA member states on an equal footing, but “in practice we find that this does not happen not,” Naudé noted.

In response to the issue, Wise implemented an “Accept my IBAN” country, providing a website where anyone who experiences IBAN-related discrimination can report the offending party. For example, a merchant who wants to pay for goods in Spain using their French IBAN can report a Spanish supplier who refuses to accept the non-Spanish SEPA account number.

The campaign is backed by a coalition of leading FinTechs and neobanks, including Klarna, N26, Raisin, Revolut. and Bunq, and the aim is to present cases of discrimination to the European Commission and relevant authorities to further highlight the extent of the problem that exists.

See also: Modulr Unveils SEPA Instant Service for Real-Time European Business Payments

This campaign indicates that non-governmental stakeholders interested in the growth of the European payments ecosystem are taking an increasingly active stance against unnecessary barriers erected by banks and other institutions.

Learn more: State of Open Banking in Europe, Africa and the Middle East

As Naudé said: “This is something that we are trying to bring attention to both at the consumer level, at the bank level and at the decision-maker level, to help change things the most quickly as possible. Pointing out that this is widespread will help get the attention of the right people to enforce the rules that are already in place.

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NEW PYMNTS DATA: THE CUSTOM PURCHASING EXPERIENCE STUDY – MAY 2022

About: PYMNTS’ survey of 2,094 consumers for The Tailored Shopping Experience report, a collaboration with Elastic Path, shows where merchants are succeeding and where they need to up their game to deliver a personalized shopping experience.


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Elaine R. Knight