By Patti Murphy
ProScribes Ink
Instant payments are now the law of the land in Europe following the European Union's adoption of a new instant payments regulation. Banks and other payment services providers that offer standard credit transfers in euros must offer customers the ability to send and receive instant payments in euros. Any charges cannot be higher than those assessed for standard credit transfers, according to a statement from the EU.
Instant payments, sometimes referred to as real-time payments, are payments initiated, cleared and settled in a matter of seconds.
Under the new rules, instant payment providers must verify that the beneficiaries' banking credentials and names match, and alert payers to any possible mistakes or fraud before a transaction is completed. This requirement also applies to regular transfers, the EU said.
The regulation covers not just traditional financial institutions, as the European Council agreed to also grant full access to payment and e-money institutions (PIEMIs) by changing settlement finality rules. "The regulation includes appropriate safeguards to ensure that the access of PIEMIs to payment systems doesn't carry additional risk to the system," the EU stated.
The regulation comes now that the EU has succeeded in creating a truly single market for capital across the continent. It aims to get investment and savings flowing across all EU states, the statement said.
When it comes to electronic payments, European nations have always outpaced the United States for many reasons. Chip cards were in circulation there long before most Americans understood these were not cards made of wood or potato chips.
They were necessary because there wasn't sufficient telecommunications connectivity to support online payments throughout Europe.
There's a more obvious reason, of course: the size of the United States, coupled with the 10,000-plus financial institutions that have to link into any new system makes it a herculean task getting everyone on the same technology page.
Another thing: until recently, no real-time payment networks were available to the masses of banks and consumers in the United States. The launches of RTP by The Clearing House and FedNow by the Federal Reserve have diminished the technological and administrative hurdles to instant payments. Now the race is on for FIs and their technology providers to follow through by making payments faster and cheaper for customers.
But let's be clear: it's not an either or. Payments do not either move at the speed of light or by more traditional means. The future of payments will be more nuanced.
Many conversations about faster payments become mired in technicalities, when the reality is that most consumers and businesses want a system that allows for faster exchanges of payments than the legacy systems they have been stuck with for generations. They would be generally content if payments were made in seconds, minutes or hours.
A Federal Reserve study in 2022 found nearly 80 percent of consumers were interested in leveraging faster payments to pay businesses. More than 60 percent said they want real-time views of their account balances and immediate posting of payments they initiate.
Banking and card companies are responding. Mastercard stated last fall that it is working with JPMorgan Chase on a pay-by-bank solution that lets consumers pay billers directly from their bank accounts. Verizon is slated to pilot the service, which relies on the ACH payment rails, which can deliver payments faster, but within hours not seconds.
Visa, the largest card network, appears to be taking a go-slow approach to open banking.
FIS, meanwhile, is working with Banked, a London-based real-time payments network, to combine the benefits of real-time payments paired with open banking, where third-party financial services providers have direct access to account data needed to complete payment transactions. FIS was one of the first in the nation to complete certification for FedNow, too.
The collaboration with Banked was announced in February, at about the same time as word was released that the Jacksonville, FL company was spinning off its merchant services businesses. The spinoff of Worldpay, which handled $2 trillion in card payments in 2022, is expected to take about 12 months, FIS said.
FIS CEO and President Stephanie Ferris expressed confidence that the spinoff "advances our goal of optimizing the performance and returns while improving satisfaction of our clients and colleagues." FIS had previously sold a 55 percent stake in Worldpay to the private equity firm GTCR. The newly spun-off merchant services business will continue to operate as Worldpay, FIS said.
Meanwhile, Visa CFO Vasant Prabhu said in remarks to a Bernstein Strategic Decisions Conference last spring, "We don't know whether open banking is going to be a big deal or not a big deal. Nobody knows." He added that the "jury is still out" on just how big a deal open banking will be. Noting that it hasn't taken off as fast as some might have expected, he speculated that "Some of it is because in some cases there's no need for it," according to reporting by the Payments Dive newsletter.
"Corporations and consumers are clamoring for solutions that move their money easier and faster, and as open banking and fraud prevention mature, FIS is in a unique position to start offering pay-by-bank solutions for both businesses and consumers," said Seamus Smith, group president, global business-to-business payments at FIS.
Digital payments have been experiencing phenomenal growth, especially since the COVID pandemic, which seemed to usher in a sea change in consumer preferences for mobile and other digital ways of interacting.
FIS noted that its Global Payments Report 2023 indicated that mobile and digital payments are preferred by both merchants and consumers. Worldwide, account-to-account (A2A) transfers, like pay-by-bank, generated an estimated $525 billion in 2022 ecommerce transactions, according to the FIS research. The report also predicted that these transactions will continue at a 13 percent compound annual growth rate.
With pay-by-bank solutions, third-party providers gain direct access to banking data needed to complete financial transactions. This means payments can take place directly between consumer and merchant bank accounts with no need for card details, account numbers or sort codes. Businesses benefit from less fraud, reduced friction, faster settlement and lower processing fees. 
Patti Murphy, self-described payments maven of the fourth estate, is senior editor at the Green Sheet. She also co-hosts the Merchant Sales Podcast, and is president of ProScribes Ink. You can reach her at patti@proscribes.net.
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