Why payments in Europe have entered a new era

One month on, Matt Piper, Head of Solution Consulting at Icon Solutions, reflects on EBAday and insights gained on the state of payments in Europe.

EBAday 2025 came at a significant juncture in the ongoing evolution of payments services in Europe. The practical regulatory and compliance challenges that have dominated banks’ attention and resources in past years are starting to move into the rear-view mirror.

Increasingly, the focus is turning to enabling strategic innovation to capture new opportunities in areas such as instant payments, cross-border transactions and digital assets. How banks develop their capacity to identify and realise value across these emerging trends – and beyond – will determine their ability to lead in payments.

Delivering on the promise of instant payments

While major regulatory initiatives are starting to come to an end, there is still work to be done. With the next deadline looming in October, meeting the stringent service level agreements for SEPA Instant Credit Transfers (SCT Inst) outlined within the Instant Payment Regulation (IPR) is top of mind for many European banks currently. The requirement for 24/7/365 availability and the ability to process payments within seconds demands that payment systems possess very high non-functional requirements to achieve unprecedented levels of resiliency and scalability.  Looking ahead, the challenges will only grow as instant volumes increase, meaning that banks must move quickly to bolster their capabilities or risk significant reputational and regulatory consequences.

Banks are also considering the operational implications.  For example, always-on availability coupled with the removal of the €100,000 transaction value cap for SCT Inst enables instant high-value payments to be made at any time. This will require the use of real-time data and automation to enable more proactive liquidity management to ensure sufficient funds are always available (not just during standard business hours), while mitigating the impact of holding funds in non-interest bearing accounts as a contingency.

Despite these undoubted challenges, banks are also eyeing how the growth in instant payment volumes could translate into new and improved services. Request to Pay, for example, has long been touted for its potential to enable more flexible and convenient payments for consumers and corporates, but this promise has largely remained unrealised.  Uptake of the SEPA Request-to-Pay (STRP) scheme – which aims to promote a common standard for Request to Pay across the bloc – can charitably be described as being muted.  Traction is starting to be found, however, with the Spanish banks CaixaBank and BBVA conducting the first Request to Pay transactions between European banks in April and May. This combination of STRP with STP Inst offers a potential alternative to SEPA Direct Debit – watch this space.

Solving the cross-border conundrum

Amid enduring geopolitical uncertainty, there is a renewed focus on the need to increase Europe’s strategic autonomy by bolstering the sovereignty of its payments infrastructure. Yet despite this push for increased localisation, a global view remains essential – particularly when tackling the seemingly intractable challenge of realising faster and cheaper cross-border payments.

Despite concerted efforts, cross-border transactions remain expensive, slow, inaccessible and risky. The Immediate Cross-Border Payments (IXB) initiative – a pilot project between the EBA in Europe and The Clearing House (TCH) in the U.S. – highlighted that while many issues stem from the technical headaches caused by an outdated and fragmented infrastructure, there is arguably a greater barrier. Namely, a willingness to embrace change that does not come naturally to traditionally conservative banks.

The good news is that there is an increasing openness to new ways of thinking. There is growing interest in alternative, next-generation methods for clearing and settling cross-border payments offered by non-bank players such as Adhara, StoneX, Thunes and Wise.  Also notably, Project Nexus, led by the Bank for International Settlements (BIS), aims to provide a standardised way of connecting existing domestic instant payments systems. Say it quietly, but a new era of seamless cross-border transactions may finally be within reach.

Stablecoins versus CBDCs?

With the growing convergence of traditional and digital finance, the respective roles that central bank digital currencies (CBDCs), privately-issued stablecoins and other types of digital assets stand to play across the financial ecosystem are starting to take shape.

Yet this too is subject to geopolitical manoeuvring. In the U.S., a raft of new policies aimed at reinforcing the global primacy of the dollar have backed stablecoins and opposed CBDCs on the grounds of maintaining financial stability. Industry participants are following this lead, with recent reports suggesting that a consortium of large banks, including JPMorgan Chase, Bank of America, Citigroup and Wells Fargo, are exploring the development of a joint stablecoin. In direct contrast, the European Union is supportive of CBDCs and opposes stablecoins (on the same grounds of maintaining financial stability) and is now accelerating plans for the launch of the digital euro. A digital pound is also under investigation in the U.K.

It is unclear how this divergence will play out, but the most likely outcome (at the least in the near-term) is continued co-existence of different digital asset types and infrastructures. We are already seeing European banks cautiously exploring stablecoins for specific use-cases. Elsewhere, Banco Santander, Lloyds Banking Group, and UBS recently announced the use of a blockchain-based payment system to settle uncleared margins. This means that promoting interoperability between different digital currencies – as well as traditional financial infrastructures – will be a key priority.

Consolidate to innovate

As we reflect on EBAday 2025, it appears that banks are faced with opposing and contradictory demands. How do they drive innovation while ensuring maximum resilience? How do they increase local autonomy while maintaining global interoperability? How do they simultaneously support and build on competing technologies?

Yet upon closer examination, these priorities are only contradictory if addressed in isolation. Banks that pursue a broader ambition of moving towards a single, consolidated infrastructure – capable of supporting any type of payment, anytime, anywhere – can overcome the significant complexities and limitations imposed by traditional siloed approaches.

The real question then becomes: how do banks realise this ambition safely, quickly and cost-effectively? There is no silver bullet, but we are pretty sure the answer is supported by a flexible payment framework that allows banks to stay in control and move at their own pace to meet new opportunities and requirements as they emerge.

To discuss your payments requirements, get in touch with Icon.