Payment Landscape

SEPA, PSD3 and instant payments: what to expect in 2024?

Matthieu Blandineau
January 2024
min read

Payment systems and the regulations that shape them are constantly evolving, creating significant opportunities and new challenges for fintechs and bank teams.

2024 promises to be an especially packed year in that regard!

In December 2023, we had the honour to host a webinar on the major changes expected to SEPA in 2024 and beyond, with outstanding guests covering everything payment institutions (PIs), electronic money institutions (EMIs) and banks should know about PSD3, instant payments, IBAN verification, new safeguarding requirements and more.

This blog is a summary of the information shared by our speakers:

  • Katja Heyder, Head of User Relations at EBA CLEARING

  • Francis De Roeck, Member of the EPC Scheme Management Board and Head of Industry Engagement for Payments at BNP Paribas

  • Pierre Hautenauve, Senior Manager at Ailancy.

We also gathered questions asked by our audience and their answers in a dedicated Q&A section below.

Instant payments

The first change coming to SEPA in 2024 will be the European Commission initiative on instant payments.

Before we cover the expected timing of its entry into force, let’s explore what it includes.

What’s in the European Commission’s instant payments proposal?

The first main element is reach. Eventually, all banks, payment institutions and electronic money institutions in the European Union will need to allow their customers to send and receive SEPA instant credit transfers (SCT Inst).

Today, a majority of bank accounts are already reachable via instant payments because most major banks are connected to instant payment systems. But a lot of smaller entities are not.

The second element is pricing: the pricing asked to send an instant payment can not be higher than the pricing asked to send a regular payment. It is a key measure to increase the adoption of instant payments.

The third element is the introduction of mandatory IBAN name checks before initiating any instant payment. But we will come back on it later, as IBAN name checks will eventually apply to any SEPA payment.

The fourth element is the evolution of sanction screening rules. Today, all participants in instant payments are required to screen each and every transaction against a list of sanctioned entities and individuals. If the name of the sender or recipient of an instant payment matches the name of the listed person or entity, it generates a “hit,” and the payment is blocked until further verification.

But doing so in a 10-second time is very complex, so this rule led to a lot of false positives themselves, leading to a lot of failed instant payments because said payments were not executed within the defined 10-second time for instant payments.

The new rules for sanction screening will require PIs, EMIs and banks to screen their client databases every day instead of for every payment, which should give them more time to solve false positives and decrease the failure rate for instant payments.

What are the impacts of the new instant payment proposals on PIs, EMIs, banks and payment systems?

Today, some banks are directly connected to SEPA payment systems as direct participants, while all PIs and EMIs SEPA participants and the majority of banks are indirect participants.

For clearing and settlement management systems (CSMs), the payment systems at the core of SEPA, such as EBA clearing, this regulation will have two main effects: An influx of new direct participants in instant payments will require more onboarding efforts and certification windows from the CSMs Increasing instant payment volumes will require CSMs to ensure their instant payment systems are scalable and can manage these volumes. EBA clearing has already planned large volume testing to ensure their systems, but most importantly, their direct participants' systems are ready.

Indeed, the same effects will impact banks acting as SEPA sponsor banks: they will need to ensure all their current and future SEPA indirect participants can connect to instant payments in time and that their systems can manage higher volumes of instant payments.

When thinking about the last mile of the chain, PIs, EMIs and banks sending and receiving payments on behalf of their customers, the impact is expected to be higher for smaller entities that are not already connected to instant payments and will have to adapt to a lot of new elements.

First, they will need to connect to real-time payment infrastructures. And they will need to support the specific messages used in SEPA instant credit transfers.

But maybe most importantly, they will need to adapt their organisation and operations to support real-time payments, 24/7/365, which will be a major shift.

What is the expected timing for instant payments in Europe?

As of early January 2024, the latest status is that the final compromise text between the Commission, the Parliament and the Council has been agreed upon.

European instances are currently translating the whole text to all European languages, and the text is expected to be voted on between mid-January and mid-February 2024.

It should be published and become active 20 days after the vote. So let’s say March 2024.

From March 2024, the timelines included in the text will start, which gives us the following timeline:

December 2024:

  • Banks of EU and Eurozone countries are required to support receiving SEPA instant payment

  • Banks, PIs and EMIs can screen entities and individuals only once a day

December 2025:

  • Banks of EU and Eurozone countries are required to support sending SEPA instant payments

  • Banks of EU and Eurozone countries are required to support IBAN name verification on instant payments

December 2026:

Banks of EU non-Eurozone countries are required to support receiving SEPA instant payments

March 2027:

PIs and EMIs of EU and Eurozone countries are required to support sending and receiving SEPA instant payments

June 2027: 

  • Banks of EU non-Eurozone countries are required to support sending SEPA  instant payments

  • Banks of EU non-Eurozone countries are required to support IBAN name verification on instant payments

  • PIs and EMIs of EU non-Eurozone countries are required to support sending and receiving SEPA instant payments

PSD3 and the PSR

The next big changes coming to payments in Europe are introduced by two texts introduced in 2023: the third Payment Services Directive (PSD3) and the Payment Services Regulation (PSR)

The European Commission has presented them as a package with the ambition of making the European payment market more innovative, competitive and safe.

In short, PSD3 focuses on the regulatory and licence aspects of payments while the PSR goes closer to the use cases and gives further details into what the different actors need to do in the provision of payment services in Europe.

Elements of these texts will have major impacts on PIs, EMIs and banks in the next few years, and we explore in the next sections the main changes they bring outside of open banking and access to financial data.

New safeguarding requirements

In Europe, Pis and EMIs are required to safeguard customer funds. Most of them use the segregated account method, where customers’ funds are held in dedicated accounts at a bank when not used for payments.

New requirements will mandate PIs and EMIs to safeguard customer funds at two different banks when using the segregated account method. Central banks will be allowed to open safeguarding accounts for PIs and EMIs, but they won’t be required to.

There are still a lot of unknowns about this new requirement, including how funds will have to be split between the two banks and what regulations will apply if the two banks aren’t in the same country.

Precisions are expected to be added to the texts within 2024, and the implementation of this requirement isn’t expected to happen before mid-2025 or early 2026.

IBAN verification or IBAN name check

While the instant payments legislation introduced the concept of IBAN verification for instant payments, PSD3 extends it to all payments. The goal of IBAN verification is to reduce payment fraud.

IBAN verification is the process by which a payer can confirm the name of a payee before sending a payment to a specific IBAN.

Concretely, when initiating a payment, a payer will have to enter an IBAN and the name of the beneficiary corresponding to this IBAN. The sending bank, PI or EMI will have to return one of the four following answers to the payer:

  • Full match: the account holder of the provided IBAN is 100% similar to the name entered by the payer

  • Almost match: the names are close

  • No match: the names are too or completely different

  • Impossible to check

The payer will be able to decide whether to send the payment or not based on this information.

The latest versions of the instant payments proposal introduce an important element when it comes to the timing of IBAN verification implementation: IBAN verification will actually apply to both instant (SEPA instant credit transfers) and regular (SEPA credit transfers) payments at the same time.

It gives PIs, EMIs and banks until December 2025 to implement IBAN verification.

Direct access to payment systems

The third major novelty introduced by PSD3 and the PSR is the possibility for PIs and EMIs to get direct access to payment systems, meaning they will be legally authorised to become direct SEPA participants and connect directly with SEPA CSMs.

The main benefits for PIs and EMIs to become direct participants would be to cut intermediaries in the payment chain, making them independent from their sponsor banks' cut-off times and potential technical issues, and cutting costs.

However, the texts they are today still contain a lot of unknowns.

First, to be a “full” direct participant in payment systems, you need to settle your payments, and this is done via settlement accounts at the European Central Bank. Today, there is no clarity on whether PIs and EMIs will be able to open such accounts. If they don’t, they’ll still need to work with commercial banks to settle their payments, significantly reducing the benefits of becoming direct participants.

It is important to note that the upcoming legislation on instant payments already includes the possibility for PIs and EMIs to become direct participants in instant payment systems, but it doesn’t go further than that and doesn’t cover settlement arrangements.

In addition, they will still need to safeguard their customer funds and, therefore, work with commercial banks or, hypothetically, central banks.

Finally, being a direct participant involves additional requirements, liabilities, and operational complexity compared to being an indirect participant, so PIs and EMIs choosing to become direct participants will most likely be the largest ones.

Similar to the new safeguarding requirements, we are in the early days of the legislative process and are waiting for more precision on this element of the regulation.

Getting ready for the upcoming changes to SEPA payments

While we are still waiting for additional precisions on many of the changes mentioned above, there is no doubt that they will require significant adaptations from banks, PIs and EMIs currently participating in SEPA. And they will add complexity for new participants.

Numeral is a payment technology provider. We provide the infrastructure for fintechs to connect to partner banks, access schemes, and automate payment operations.

We already connect and support the payment operations of many SEPA participants, including Swile, Spendesk and Alma. We are committed to supporting our customers in these evolutions and integrating these changes into our platform so our customers don’t have to commit their resources to it.

If you’re looking into how these changes will impact your company and would like to know how to get ready for them, do not hesitate to contact us.


Will PIs and EMIs have direct access to all SEPA payment schemes?

Yes, PIs and EMIs will have direct access to all SEPA payment schemes: SEPA credit transfer, SEPA instant credit transfer, SEPA direct debit core and SEPA direct B2B.

PIs and EMIs will most likely have direct access to instant payments first.

Will there be a new scheme for IBAN verification / IBAN name check?

Yes, the European Payment Council (EPC) is currently writing an IBAN verification scheme. A public consultation is expected to take place by March 2024.

How will IBAN verification technically work?

The technical requirements and workflows for IBAN verification will be defined in the EPC rulebook. Then, existing providers of similar services and players like EBA CLEARING will most likely adapt their solutions to fit the EPC rulebook requirements and offer their services to PIs, EMIs and banks.

Will IBAN verification / IBAN name check be mandatory on all payments?

Yes, IBAN verification will be mandatory for all push payments: SEPA instant credit transfers and SEPA credit transfers.

Will the new safeguarding requirements apply only to SEPA participants?

No, the new safeguarding requirements that mandate PIs and EMIs using the segregated account safeguarding method with at least two banks will apply to all PIs and EMIs, whether direct, indirect or non-SEPA participants.

With the obligation to support instant payments, will regular SEPA credit transfers be decommissioned?

No. There are many use cases where regular SEPA credit transfers will be the best payment method, especially for technical reasons.

Companies sending hundreds of thousands or millions of payments at a time will still rely on SEPA credit transfers that can easily be processed by batch rather than individual instant payments.

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