Last month, the first phase of the European Union’s new Instant Payment Regulation (IPR) came into effect, aiming to improve payment experiences across Europe.

For PSPs, this regulation marks an exciting opportunity to develop more innovative products and services. It will also reduce barriers to open banking-enabled payments, helping PSPs create a future where instant payments become the standard.

In this article, we explore what the IPR is, how it will impact payment culture in the Eurozone, what that means for PSPs, and how it could impact the adoption of open banking.

SEPA Instant - the current state of play

SEPA, short for Single European Payments Area, is a payments rail which enables Euro Credit transfers. There are currently 38 countries in the SEPA region, including countries that are not part of the Eurozone or the European Union, such as the UK. SEPA Instant is SEPA’s instant payment option, providing instant payments 24 hours a day, 7 days a week, 365 days a year. For payments to qualify as “instant”, they must be settled within 10 seconds of initiation.

But while SEPA Instant has been available since 2017, adoption has been slow. There are two key reasons for this: firstly, many banks and other financial institutions typically charge users (PSUs) to send — and in some cases, receive — SEPA Instant payments. The charge is usually determined by the size of the transfer, and typically falls between €0 - €5 per transaction, but can be as high as €12 in some regions — for example, in Spain. This understandably puts many PSUs off using the service. Secondly, banks and financial institutions are not required to offer SEPA Instant as a payment option, meaning there is inconsistency in the availability of SEPA Instant across banks, leading to low availability which impacts usage.

This combination of factors has led to a lack of cohesive acceptance of SEPA Instant payments, illustrated by instant payments making up less than 20% of transactions in the SEPA area as recently as 2024.

This is an important point because, when compared with the UK, the EU is lagging behind with instant payments. The UK’s Faster Payments scheme has been in operation since 2008, and allows PSUs to send and receive payments instantly without any additional fees. It’s also offered by virtually all banks and PSPs, meaning it has become the default option for bank transfers under the £1 million limit. As a result, UK consumers now expect bank transfers to be sent and received within seconds, setting higher standards for payment speed and availability than in the EU.

What is the Instant Payment Regulation?

The Instant Payment Regulation was adopted by the European Parliament and Council on 13 March 2024. It aims to accelerate the roll-out and standardisation of instant payments in Europe and covers euro credit transfers within the European Union. It also introduces new requirements for the verification of payees and sanction screening. It is hoped that introducing this regulation will raise the standards of European payments for consumers and businesses within the bloc.

To ensure a timely rollout, the regulation is taking a phased approach. Once completed, it will eventually require all European banks and PSPs to accept and offer instant payments via SEPA Instant, and any fees charged for SEPA Instant transfers will need to be brought in line with the cost of normal SEPA Credit Transfers. In practice, this means SEPA Instant will likely become a free-to-use service across the EU.

The table below provides a timeline of exactly what is required regarding SEPA Instant under the IPR and when it will come into force:

The first phase deadline has already passed. It was on January 9th 2025 and stipulated that all Eurozone-based financial institutions — including PSPs and banks, other than Electronic Money Institutions (EMIs) and Payment Institutions (PIs) — must accept SEPA Instant payments. (Eurozone EMIs and PIs will be required to meet these regulations from dates in 2027, as will non-eurozone-based financial institutions).

This means that SEPA Instant payments will no longer revert to a SEPA Credit Transfer (often taking days to complete) because the recipient bank is not part of the scheme. It also removes the possibility of the recipient being charged an unexpected fee and therefore having a negative payment experience.

The second IPR deadline will advance the IPR’s aims even further. As of October 9th 2025, financial institutions within the Eurozone, including PSPs that aren’t PIs or EMIs, will be required to allow PSUs to send SEPA Instant payments with effectively no fees. This will complete the standardisation of end-to-end instant payment availability for most of the Eurozone at no cost to PSUs.

What impact will the IPR have on payments in Europe?

With significantly increased coverage across Europe at effectively no extra cost, SEPA Instant payments are likely to match the ubiquity of the UK’s Faster Payments scheme. While it may take some time for PSUs to adapt to this change and start to trust the SEPA Instant method, we expect there will be a gradual cultural shift in PSUs’ expectations around the speed and reliability of payment services from PSPs. Importantly, we see this shift as an opportunity for PSPs to provide more innovative products and services built on the more widely accessible instant payment rails.

For PSUs, more reliable and widespread instant payments will make it easier to manage payments and reduce payment anxiety. No longer will they need to wait 1 to 2 days for a payment to settle, or for banks to open on a Monday for their payment from the weekend to be received.

For businesses, there’s a similar anxiety-easing benefit. As they look for ways to ease cash flow challenges, payments that settle instantly will mean they can keep their books up to date more consistently and in real time. Those that operate in high-value exchanges will also benefit, with the €100,000 cap for SEPA Instant being removed in October 2025, and financial institutions being able to set their own upper limit.

Beyond the direct impact of instant payments on businesses and consumers, there’s also a secondary impact this could have on PSPs and the financial services landscape. Widespread and free access to instant payment rails offers PSPs the opportunity to develop new and exciting payment services, and new opportunities to expand their customer base and revenue. A key foundation that can drive the development of these value-added services is open banking.

How the IPR can boost the growth of open banking in the EU

Open banking has continued to grow in popularity across Europe, but low SEPA Instant usage caused by fees and patchy coverage have presented barriers to progress.

Open banking was established to drive innovation and improve financial services, and while it can use traditional, slower payment rails, its added value comes from offering PSUs the ability to make instant payments at a lower cost than traditional card payments.

The low availability of instant payments and the added fees have meant that Pay by Bank solutions have lacked appeal for PSUs. However, with the IPR removing these obstacles, open banking payments will become a free-to-use, instant, and user-friendly payment option for consumers — and a lower-cost, lower-risk payment option for businesses when compared to cards.

By offering Pay by Bank, merchants can have confidence in being paid and improve their ways of working due to faster access to revenue. They will also have more time to pay suppliers and staff and a more up-to-date view of their earnings for financial management.

PSPs will also be able to support more unique business use cases that rely on the instantness of payments. For example, marketplaces where goods with high sale values are sold between users can take place within the business’s app or website instantly by using the Pay by Bank payment option.

Over time, e-commerce businesses will look to implement Pay by Bank at the checkout. This will allow them to avoid costly card fees, reduce the risk of chargebacks, and ease cash flow. While card payments are currently the default, European businesses now have the option to offer customers an alternative payment option built on open banking and the substantial benefits it brings.

Additionally, the growth of open banking payments can have a knock-on effect that sparks interest in other open banking-powered services. As interest and trust in open banking for payments increases, many PSPs will explore how open banking data solutions could help them develop innovative and new financial services. This will open up opportunities to expand their business by serving entirely new use cases that benefit a wider target audience. In this sense, the changes implemented by the IPR can be seen as indirectly reducing barriers to open banking for payments, which in turn can act as a launch pad for developing better, faster, and more flexible financial services within Europe.

As the next deadline for the IPR nears, we’ll be providing more information for PSPs. It’s an exciting time for payments in Europe as the regulators start to recognise what’s needed to power creativity in the sector. We hope the IPR can spark a new era of payment and financial services innovation, ultimately benefiting both consumers and businesses across the continent.