The payments space is full of internal contradictions. It is highly competitive, massively fragmented and also intensely regulated. Technology has made payments more secure while also unleashing a wave of relentless and increasingly sophisticated fraud. It is a space where banks are on the hook for massive investment in infrastructure and compliance even as payments become increasingly disconnected from accounts. And customers expect payment solutions that are both frictionless but also lock-tight secure.

‘The payments market, and its regulators, are undergoing fast change,’ said Dag-Inge Flatraaker, Senior Vice President, Group Payments Infrastructures at DNB, discussing the waves of regulation that are currently reshaping the payments landscape in Europe and beyond to be open, real-time and global.

In Europe one such change is now looming, with the Instant Payments Regulation representing ‘a major shift in payment rails’. According to Connie Blacklock, Executive Director, EMEA Head of Real Time Payments at JP Morgan Payments, this update to the current Single Euro Payments Area (SEPA) rules will mandate instant payments, channel ubiquity, pricing, Verification of Payee and enhanced consumer protections and fraud mechanisms.

‘It places huge pressure on participants to get this build done but it will totally change things,’ said Blacklock. ‘It’s so exciting.’ The promise of these changes, however, will only be realised if customers see value in them.
‘The infrastructure is there, the regulation is there, but now it will all come down to the use cases,’ said central banker Alex Stervinou, Director, Cash and Retail Payments Policy and Oversight Directorate at Banque de France.

These changes may bring harmony across the eurozone, but there are bigger challenges when seeking to connect across the Atlantic. The Immediate Cross-Border Payments (IXB) pilot is designed to revolutionise cross-border payments in the euro and US dollar currency corridor by leveraging the real-time payment systems, RTP® in the US and RT1 in Europe.

According to Emanuela Saccarola, Managing Director, Global Head of Cross Border Payments at Citi, the pilot has experienced issues: ‘As we thought, the technology is not the problem,’ she said, identifying an unsettled legal framework and reachability as key challenges.

‘You can’t go mandatory from day one, but you have to reach 90% of beneficiaries in a market to be relevant,’ said Saccarola. ‘This is the critical success factor, and you need a road map to reach this level of adoption, otherwise it’s just an experiment.’

Building out bilaterial trans-Atlantic instant payments may have its challenges but banks are already gearing up for global interoperability. Global data standard ISO20022 sets a common language for global payments, creating richer and more structured financial information to help lay the groundwork for global instant payments. Even so, Sanjeev Bhatti, Principal Product Manager, Direct Clearing and Emerging Payments at BNY Mellon, said the goal of global interoperability remains highly challenging because of the complexity of navigating multiple time zones and regulatory zones. He pointed out that different regulators have different approaches, priorities and move at different speeds.