The Single Euro Payments Area has historically been a method of transferring payments between countries that use the Euro. Now it's attempting to evolve with a new initiative called 'instant payments'. As the name implies, it's a way of transferring funds almost immediately. For example, let's say that I wanted to send you some money. After initiating a transaction, the funds would appear in your account within a matter of seconds. This kind of feature isn't widely available today, but it's poised to take off.
Are there Cross-Border Implications?
SEPA will provide the rails (network infrastructure) to facilitate instant payments between all the Euro countries. This is a big deal, even though the concept of immediate payments isn't entirely new. More and more countries are adopting some form of immediate payments all the time. However, adoption is generally confined within each region because it's easier to regulate. The central bank of a country usually provides the facilities and sometimes mandates that banks support the feature.
There's no organization mandating that every bank in the world must support instant payments. Because SEPA can make it happen in Europe for all the Euro countries, this solution is different from the other immediate payments schemes that are already up and running.
Who Benefits from SEPA's Instant Payments?
SEPA's implementation of instant payments will provide users with more choice while also making the process of sending money more convenient. One of the main goals of getting the central bank involved is to make sure that when immediate payments schemes are implemented, the main beneficiary is the customer and not the banks. It's not just an easier way for people to transfer money to each other—there's also an opportunity for richer information to accompany the transaction itself.
Instant Payments Present an Opportunity for Banks to Innovate
Right now, when someone wants to make a high value payment such as a deposit on a house, they have to get a bank check. There's no other way to transfer such a large amount of money. The customer will benefit greatly if instant payments make transactions like these easier. At the same time, the banks see these additional services as an important way that they can better engage with customers. They are challenged constantly by new players in the payment industry, so this gives them an avenue for innovation.
When will SEPA Rollout Instant Payments?
Instant payments are due to be delivered late 2017. This is when the rails will be available for banks to use. As for when the individual countries and banks will sign on and actually use those rails to provide innovative services, I'm not so sure. The time is rapidly approaching, and this is a disruptive game-changer for the payments industry. I think everyone is watching intently to see exactly where the future is headed.