European banks are preparing their tech stacks to comply with Instant Payment Regulation, which were set in motion on April 8. 

The European Parliament and European Council, which provide the foundation for the single euro payments area (SEPA), published the Instant Payment Regulation March 14. 

The regulation states that European banks must be able to receive instant payments from customers within nine months, and must be able to offer customers the ability to send instant payments within 18 months of publication of the regulation, Kjeld Herreman, head of strategy advisory at consultancy and technology firm Redcompass Labs, told Bank Automation News. 

European banks now are weighing in on the pros and cons of instant payments technology.

Unrealistic timeline 

In a survey facilitated by Redcompass Labs, 89% of European bank senior payments professionals said they are seeing growing demand for instant payment products. However, 58% said the regulation timelines are unrealistic and one-third of respondents are not confident in meeting those deadlines.  

Redcompass Labs surveyed 200 senior payment professionals from European banks in the United Kingdom, France, Germany, Italy and Spain. 

Many private, savings and investment banks are anxious about the timelines, Herreman said, noting that meeting the deadlines will be “very challenging.” 

With the impending deadlines, banks are forced to select tactical solutions rather than consider strategic upgrades, he said. 

“Banks can’t think about long-term perspective and basically need to improve what they have today, rather than procuring entirely new solutions,” Herreman said. “They are forced to go towards the tactical solution, simply because they don’t have enough time to strategically upgrade their core system.” 

Weighing cost

FIs are also weighing how much of their technology budgets they will need to spend on instant payments.  

According to the report: 

• 76% of respondents plan to invest in technology to comply with regulation. 
• On average, European banks expect to invest between 1 million and 3 million euros (up to $3.2 million) on new technology. But, even that estimate is probably unrealistically low, Herreman said.  

Banks must consider: 

• Integrating an instant payments engine into all their channels; 
• Updating mobile apps; 
• Updating online banking; and 
• Introducing verification of payment. 

The regulation “probably underestimated the impact of the change for banks,” Herreman said. 

Cost v. benefit

Despite deadlines and costs, European banks say instant payments will increase their ability to meet client demands, according to the report. Respondents said instant payments offer the following benefits: 

• Displacing credit card payments; 
• Improving customer experience; 
• Payment certainty; 
• Working capital optimization; and 
• Reducing fees.