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The Dutch Payments Association has sent a list of concerns levied at the European Commission's instant payments proposals to Brussels.
The EU’s long-running aspirations to finally make instant payments “the new normal” are set to be a key regulatory theme in 2023.
The European Parliament has now selected a rapporteur for the file — a Dutch lawmaker called Michiel Hoogeveen.
As a relatively small document, there is cautious optimism among payments insiders that it may pass smoothly.
However, it also risks neglect from EU lawmakers as they grapple to pass larger and more pertinent packages, related to geopolitical issues affecting the trading bloc.
The Dutch Payments Association has now weighed in making its views known to the commission on how it should progress with the instant payments package.
“We support the commission’s proposal for legislating instant payments in Europe. However, the current proposed obligations are too broad given the purpose to be achieved. We believe a European regulation for instant payments should aim to avoid (or minimise) undesired side effects or other negative market consequences,” says the letter, signed by Dutch Payments Association chair Gijs Boudewijn.
The trade association, which boasts members including local firms such as ABN AMRO, bunq and Rabobank, as well as international players such as HSBC and Bank of China, has criticised some elements of the commission’s proposal.
For example, Article 5, which places a compliance requirement on all payment service providers (PSPs) to provide SEPA instant credit transfers.
“We believe that in order to achieve the goals of the proposal, it is not necessary to impose the obligation laid down in Article 5a(1) on all ASPSPs [account servicing payment service providers] that are currently technically able to send and receive SEPA credit transfers,” the trade association argue. “It seems disproportionate to impose the obligation set in Article 5a(1) to all credit institutions that currently technically offer sending and receiving of regular credit transfers.”
The association provides the example of “small ‘niche banks’ servicing a (very) particular client segment (with low volumes), such as PSPs not active in the retail market with no client demand for instant payments”, as fitting this category.
In addition, the Dutch Payments Association said that it considers the requirement to offer payers the same interfaces for placing a payment order for an instant credit transfer as for placing a payment order for other credit transfers as another instance of disproportionately.
"Several PSU [payment service user] interfaces are not fit for this purpose and importantly, there is no clear need and added value to process the payment order instantly for these interfaces, such as for paper-based credit transfer instructions."
For example, the Eurosystem endorsed this in its 2020 Retail Payments Strategy, suggesting that to increase instant payments' attractiveness, instant payments should be available through “all commonly used electronic channels”.
"Significant investments are required in order to meet the current requirement stated in Article 5a(2)(a) while the benefits for end-users are marginal," the association argues.
The association's letter also suggests that fees (for all credit transfers) are likely to be increased in order to recover the costs.
"We therefore suggest to require PSPs to offer clients the possibility to send instant payment transactions for single payment initiations via at least one electronic interface (where the payer is directly and actively involved in the initiation)."
Additionally, where credit transfers are embedded in a broader contract arrangement, such as with the Netherlands' iDEAL scheme, the association recommends that it should not be in scope of this interface mandate, and therefore no obligation arises to migrate to instant credit transfer.
The association has also taken issue with pricing rules, which have become one of the more thorny issues in the legislative package.
“We believe that banks (ASPSPs) should be able to set their own price(s) for initiating and sending instant payments,” the association, known locally as Betaalvereniging Nederland, argued. “To our knowledge, instant payments are in the Netherlands not priced differently than regular credit transfers.”
The association has also recommended adjustments to current Confirmation of Payee (CoP) plans.
“We are in favour of offering a confirmation of payee (CoP) service and note that it is much appreciated by PSUs,” said the association, adding that most account servicing payment service providers in the Netherlands already offer CoP free of charge to their clients.
CoP has proven to be a good measure for the payer to prevent misdirected payments and recognise and help prevent certain types of fraud, such as invoice fraud and authorised push payment fraud, the association said. “Most importantly, our customers value it for the confirmation provided and the prevention of payments to unintended beneficiaries (which are not necessarily fraud-related).”
With the current proposal, the association argues, it can be expected that several CoP providers will step into the market.
“This could create a complex and fragmented market in Europe with different providers active in each country,” the letter warns.
Therefore, EU member states need to strive for interoperability between CoP providers, using a timeframe such as 36 months.
“We would not object to investigating the feasibility of a pan-European [sic] solution, taking into account the privacy legislation and views. This could, however, turn out too costly and/or complex compared to already existing solutions in the market,” the association said.
The association also said that a CoP service should not disturb the customer journey, and therefore it is very important where in the customer journey the service is offered.
Among the amendments recommended by the association are changes to Article 1, which currently sets out that “the payee’s payment account is credited with the amount transferred within 10 seconds after the time of receipt of the payment order”.
According to the trade association, this requirement “leaves too much room for interpretation”.
Rather, it recommends bringing this requirement more in line with those set out in the European Payments Council’s SEPA Instant Credit Transfer Rulebook, which include guidance on maximum execution times of ten seconds.
This is in order to avoid any confusion and misunderstanding about the processing timelines of instant credit transfers.
The payments association is likely to understand better than most the intricacies of instant payments.
For example, the Netherlands was the first country in the eurozone to introduce instant payments on a large scale in 2019.
Since then, as the lobby group says in its 2021 annual report, instant payments have become "the new normal" in the country, touting itself as the leader in Europe on the matter.
Dutch banks and payment institutions have now carried out almost 1.5bn instant payments between different banks in total since launch the association has noted.
According to VIXIO analysis, the Netherlands accounted for around 15 percent of total SEPA Instant Credit transfers across the EU in 2021.
