Open Banking and Instant Payments complement each other excellently. Particularly in e-commerce and investments, Account-to-Account (A2A) payments are gaining popularity as they enable fast and convenient transactions. These innovations offer significant advantages:
What is SEPA Instant?
SEPA Instant was introduced in 2017 on the initiative of the European Union and is an innovative payment method specifically designed for fast cross-border transfers in the Single Euro Payments Area (SEPA). This system covers 36 countries and is based on the 2012 SEPA regulation, which forms the legal basis for a unified European payment area for transfers and direct debits. The goal of SEPA Instant is to enable real-time transfers, meaning payments can be processed within seconds instead of days. This revolutionizes traditional payment transactions by significantly improving the speed and efficiency of transactions, especially in areas where rapid payment processes are required, such as in e-commerce or the financial sector.
Why is SEPA Instant important for Open Banking Payments?
SEPA Instant is crucial for Open Banking Payments for several reasons. Open Banking, enabling secure and regulated exchange of financial data, greatly benefits from the speed and efficiency that SEPA Instant provides. By integrating SEPA Instant into Open Banking, real-time transfers can be seamlessly integrated into regular payment processes. This means that online payments are no longer confined to online banking but evolve into a versatile payment method that can be used across all industries.
In industries like e-commerce or investment, where quick payment processing is crucial, SEPA Instant, combined with Open Banking, offers a significant improvement in payment processes. For consumers, this means more convenience and efficiency as transactions can be completed with just a few clicks. Merchants benefit from improved cash flow and faster transaction processing, particularly compared to traditional payment methods like online card payments, representing a significant advancement.
Furthermore, the combination of Open Banking and SEPA Instant allows for more transparency and control over financial transactions. Customers can better manage their financial data and, with real-time information, have a clearer overview of their finances. This not only promotes trust in the financial system but also the acceptance of new payment technologies.
What are the challenges of SEPA Instant?
Despite the benefits of SEPA Instant, there are also some challenges.
- One of the major limitations is voluntariness. Banks are not obligated to offer real-time transfers in the SEPA area. Currently, just over half of all banks in the EU provide this service. This limited availability impacts the effectiveness of SEPA Instant as a universal payment solution.
- Another issue is the high transaction fees. These negatively affect consumer acceptance, as many seek more cost-effective alternatives. Currently, only about 10% of all transfers are executed in real-time, partly due to these high costs.
- Another obstacle is the lack of interoperability in both national and cross-border payments.
These obstacles significantly impact the functionality and benefits of SEPA transfers and debits and must be addressed for these payment instruments to realize their full potential.
What are the next steps?
Given the challenges faced by SEPA Instant, there are several crucial steps that need to be taken to improve the efficiency and acceptance of this payment method. One key step is the commitment of all financial institutions to offer and receive real-time transfers. This would significantly enhance the availability and acceptance of SEPA Instant in the SEPA area. Furthermore, banks should be mandated to implement both receiving and initiating transfers to improve interoperability.
Another important step is abolishing fees for real-time transfers for consumers. Real-time transfers should not remain a premium service but should be accessible to all consumers.
For merchants offering SEPA direct debit as a payment option, the transaction price is determined by various factors, making it challenging to provide a flat answer to cost questions. In general, SEPA direct debit is significantly cheaper than card payments or eWallet solutions. Businesses can already utilize and offer SEPA transactions for as low as €0.10 per transaction. The EU has responded by putting a stop to additional fees for real-time transfers. EU member countries and the European Parliament have tentatively agreed in Brussels that Überweisungen in Echtzeit künftig ohne Aufschlag möglich sein sollen - und zwar rund um die Uhr.
Increasing the Attractiveness of Instant Payments Compared to Other Payment Methods
It is crucial to strengthen consumers' trust in the security of real-time transfers. This can be achieved by combining real-time transfers with secure Open Banking APIs, leading to one of the fastest and safest payment methods. Additional security measures, such as recipient confirmation, can further enhance trust without compromising the payment process. These measures help establish SEPA Instant as an efficient and attractive payment method in Europe. They further modernize European payment transactions, providing significant benefits to both consumers and businesses. The future of SEPA Instant is promising if these steps are successfully implemented to overcome current challenges.
As examples from abroad show, Instant Payments could also be interesting for retail, hospitality, and online shops. This could trigger a counter-movement to the current diversity - some would call it confusion - of payment service providers. In the B2B sector, payment transactions lag behind and are often associated with high processing risks and costs. Until today. One reason why companies adapt more slowly to changes in payment transactions is the size of the B2B sector and the type of transactions companies typically conduct. An e-commerce company may make regular deliveries to supermarkets, restaurant chains, and other retailers.
However, if these regular payments continue to be processed with outdated methods, it leads to high administrative overhead, high cash flow risk, and potential data security issues. Switching to new, alternative payment methods can eliminate many of these problems. The potential cash flow improvements through digitized B2B payments alone can support companies more than ever today.
As Smartstore, we are pleased to announce that we will integrate SEPA Instant via Open Banking into our upcoming Marketplace Edition. This integration will provide our customers with a faster, more secure, and efficient payment method that aligns with the latest standards in e-commerce. By combining SEPA Instant and Open Banking, we can offer our users a seamless and modern payment experience that meets the requirements of the digital marketplace. We are confident that this innovation will provide significant value to our customers and partners.
For further information, we are at your disposal. Contact us by phone or email, and our dedicated Smartstore team will personally address your concerns. We look forward to hearing from you!