SEPA Instant Payments: advantages and points of criticism

SEPA Instant Payments were introduced in Europe to simplify and speed up cross-border transfers. They offer numerous advantages, but despite their positive aspects, there are also points of criticism that should be taken into account when discussing this payment method.

High costs for banks and consumers

One frequently cited point of criticism concerns the high costs associated with the introduction and use of SEPA Instant Payments. Banks have to make considerable investments in their IT infrastructure to enable real-time transfers. These costs are often passed on to consumers, which can lead to higher fees for using this service. Smaller banks and financial institutions in particular face the challenge of keeping up with the larger market players.

Security concerns

Another important issue is security. Real-time transfers potentially offer a higher risk of fraud and abuse. As transactions are completed within seconds, banks and other financial institutions have less time to recognise and prevent suspicious activity. This can mean that fraudulent transactions are more frequent and more difficult to detect or that payments are rejected immediately in case of doubt. There is also a risk that cyber criminals will exploit the technology to carry out illegal activities more quickly and efficiently.

Regulatory challenges

The implementation of SEPA Instant Payments requires compliance with strict regulatory requirements. This poses a particular challenge for smaller banks and financial institutions, which may not have the necessary resources and expertise to fulfil these requirements. In addition, the regulations must be continuously adapted to meet the rapidly changing technological and security requirements. This can lead to uncertainty and additional costs.

Technical difficulties and interoperability

The introduction and utilisation of SEPA Instant Payments is technically demanding. The banks’ different systems and technologies must be able to communicate seamlessly with each other to ensure real-time transfers. In practice, however, this often leads to technical difficulties and compatibility problems. Interoperability between the various national payment systems is not always guaranteed, which can impair the smooth processing of transactions.

Liquidität

Although real-time transfers are available to customers 24/7, central bank systems such as TARGET2 are still linked to the TARGET calendar. This leads to increased costs for banks in terms of liquidity management, especially at weekends and on public holidays. As a reminder. The TIPS DCA in Target must always have sufficient liquidity so that the TIPS payment can be executed.

To summarise, although SEPA Instant Payments offer many advantages for customers and improve the efficiency of cross-border payment transactions, they are also associated with a number of challenges and points of criticism. The high costs, security concerns, regulatory requirements and technical difficulties are important aspects that need to be taken into account in the further development and implementation of this payment method.

Contact us

This article is by our guest author Thomas Pietsch, who has been involved in European payment transactions for many years. If you have any questions on this topic, you can contact him at tp@pietsch-consult.com.