Evolving the bank: Beyond the EU Instant Payments Regulation (IPR)

As the EU Instant Payments Regulation (IPR) implementation deadlines loom (January 2025 for receiving and October 2025 for sending instant payments), Payment Service Providers (PSPs) are scrambling to get their instant payment solutions in place and are all at different stages, with some PSPs looking at tactical solutions and workarounds to meet the regulation dates.  

According to  Capgemimi World Payments Report 2025 , currently only 13% of European banks can claim a strong technology foundation for instant payments. 

Despite the challenges, PSPs could view the SEPA “instant payment” capability as a building block,  enabling them to leverage other industry initiatives around “instant” cross-border payments and opportunities to extend the use of “instant payment” rails for traditionally card payment-based channels, such as Point of Sale (POS) and ecommerce, at a wider SEPA level. 

This blog explores the regulation, key impacts and challenges for banks along with what banks can do to resolve these challenges and evolve their capabilities beyond the regulation requirements.  

Key requirements of the EU IPR 

The EU Instant Payment regulation (IPR) passed in April 2024 has the following key requirements:   

1. All PSPs that offer credit transfers in euros will have to offer the service of receiving and sending Instant Payment (IP) transfers in euros 24/7/365 through the same channels through which they offer SEPA credit transfers. 
2. PSPs will not be able to charge more for IP transfers than for other SEPA credit transfers. 
3. PSPs must provide Verification of Payee (VOP) services to payers that will verify the payee/beneficiary’s account and name, before the payment is authorised by the payer.  
4. PSPs must perform daily screening of their customers against the EU sanctions list and not perform sanctions screening as part of the instant payment flow. 
5. PSPs must report to the relevant authorities the charges for credit transfers, instant payments and on the payment account for transaction in euros every 12 months.  

For PSPs in the EU, the regulations will come into force in January 2025 for receiving IPs and October 2025 for sending IPs and performing VOP checks. The timeline for non-EU countries is 2027. 

What are the key impacts & challenges for banks? 

1. Scalability, throughput handling and high availability: The volumes of instant payments processed by the bank’s end-to-end payment solution would grow significantly as traditional SEPA credit transfer payments migrate to instant payments, and potential future opportunities of card payments traffic and other cross-border traffic migrating to the instant payment rails. There would be significantly higher throughput requirements, especially in dealing with bulk payment submissions from corporates/FIs but still within scheme SLAs. SEPA instant payments mandate a 24/7 solution to execute payments, an operational model to support it and the ability to maintain/upgrade the solution with zero downtime. These together pose a significant challenge to banks with legacy solutions and would warrant a significant IT spend on technology infrastructure. 
2. Multi-channel and payment routing: The ability to process both instant and non-instant payments across multiple channels, namely Web/API/Batch/Swift and the flexibility of the solution to expand in the future to allow for initiation of instant payments through POS replacing card payments. This requires the solution to receive payments instructions from channels and perform intelligent routing between instant and non-instant payment execution, include verification of payee checks, and payment limit checks across various parameters. 
3. Verification of payee: Develop a new SEPA-wide verification of payee service or work with other PSPs/service providers in their geography to make their existing domestic verification of payee service interoperable with the SEPA zone-wide requirements. Currently there are no common technical implementation standards on this and there is a lack of certainty on the delivery of the industry initiative on SEPA EPC Directory Service (EDS) within the regulation timelines which poses significant challenges for PSPs. 
4. Sanctions screening: Changes to the sanctions screening model wherein banks will have to screen their customers daily, irrespective of whether their customers initiate or receive euro payment transfers. Additionally, with the future update of the “instant payments” rail for SEPA One leg Out (OLO), banks will also have to screen transactions against non-SEPA specific sanction lists, the OFAC list maintained by the United States for example. 
5. Reporting and compliance: Banks will have to provide evidence to the relevant authorities that they are not charging more for instant payments compared to SEPA credit transfers. 

The functionalities around SEPA verification of payee and sanctions screening will also warrant changes in other areas of the bank outside of payments, such as channels, charging and pricing, financial crime and also integration with third parties (for SEPA VOP).  

 Looking beyond the regulatory requirements  

Banks should not look at IPR purely as a regulatory mandate, but instead treat it as an opportunity to improve customer experience, provide value-added services to customers and evolve different business revenue models. In order to achieve this, banks will need to: 

1. Perform an end-to-end review of their business and technical architecture and its (a) suitability to support the non-functional impacts of SEPA instant payments, with significantly higher volumes and throughput with zero downtime, and (b) ability to modify the solution easily and in a controlled way to cater for future value-added services. 
2. Invest in the development of a resilient, scalable, and easily maintainable new payment solution to handle high volume and throughput of payment transactions that will also allow different payment processing configurations. Such a solution should be implemented in phases while keeping in mind that it must be possible to extend the same basic solution for future use cases (e.g. cross-border “instant” payments, POS payments, linkages to CBDC infrastructure, etc.) 
3. Develop a Payment Order Manager that all channels can integrate with. This layer provides a single interface to receive payment instructions from a customers and provides capabilities for (a) intelligent routing of payments – instant/non-instant based on various parameters, such as payment amount, payment limit, customer agreement, cut-off time, and (b) initiate validation checks, including VoP checks, and (c) the ability for future channels to integrate easily, and (d) provide the option to offer value-added services.

Contact us if you would like to know more about how IPF can accelerate your payments journey or how Icon Business and Technology Architecture consultants can prepare you for this transition.