With the two main instant payment infrastructure providers expanding their reach in Europe, payment service providers (PSPs) face a decision on whether to join one or both schemes. A flurry of announcements from EBA Clearing this year to date suggests that the onboarding of European banks to the Euro Banking Association’s (EBA’s) real-time payment processing facility RT1 is reaching a significant stage. Last month saw three Nordic banks join the EBA’s real-time payment system. In February this year, the initiative reached a significant milestone when three major German banks – Deutsche Bank, DZ Bank and Commerzbank – signed up to membership, bringing the number of PSPs addressable via RT1 to 2,300. EBA Clearing has reported making similar inroads into Italian, Spanish, Baltic and Austrian markets. The total number of transactions processed via the mechanism reached 15 million earlier this year, of which over 99% were settled and final within three seconds.
Market penetration is key for instant payments. According to EBA Clearing, RT1 reaches a substantial proportion of PSPs actively using the SEPA (Single Euro Payments Area) Instant Credit Transfer Scheme, which amounts to 60% of all PSPs operating in SEPA. The more banks and corporates are signed up, the greater the prospect of reducing late payments and streamlining settlements and reconciliations overall. However, the goal of real-time payments in euros, with instant notification to payer and payee, may still be some way off. Individual countries within Europe are on the road to domestic instant payments schemes, but cross-border instant payments depends on membership of a viable pan-European scheme. The European Central Bank’s Target Instant Payments (TIPS) scheme, which went live last year, potentially competes with RT1 for members. RT1 currently outruns TIPS in terms of numbers of members. TIPS, however, has advantages including fewer barriers to entry for smaller banks or fintechs, who – under the European Union’s payment directive PSD2 – can partner with a sponsor bank to gain access to TIPS. As the fintech market gathers steam, this factor might prove decisive in shaping this part of the payments landscape.
Liz Loxton is editor of The Treasurer