In the context of European banking, customers increasingly expect real-time transactions, transparent exchange rates and reasonable transfer fees. In practice, however, the way banks operate doesn’t always align with customer demand.
When it comes to intra-European payments, two barriers currently inhibit the fast, free and open flow of money on the continent, including the slow rollout of the bank transfer scheme known as SEPA Instant or SEPA Instant Credit Transfer (SCT Inst), meant to enable real-time cross-border payments across the 36 countries within the Single European Payment Area (SEPA).
Yet despite the scheme’s promise of fast and seamless European bank transfers, access to SEPA Instant transfers remains low, with the proportion of banks that offer both SEPA Credit and SEPA Instant as low as 5% in Ireland and just 3% in Denmark.
Read more: Instant Payments and Data Unlock Contextual Banking Opportunities for Consumers
According to Steve Naudé, head of product at Wise Platform, another issue that continues to undermine the success of SEPA Instant is the way that many banks add an additional surcharge for customers who want to use the service, making it an even more expensive option than the non-instant alternative.
“All institutions should offer this to their customers, and it should be offered at no additional cost,” he told PYMNTS in an interview.
Another issue that has curtailed SEPA’s real-time payment scheme has been the lack of interoperability between the two underlying payment rails, TARGET Instant Payment Settlement (TIPS) and the RT1 system.
TIPS is backed by the European Central Bank with the aim of facilitating real-time 24/7 payments between bank accounts in the Eurozone, while RT1 is an alternative instant payment protocol controlled by EBA Clearing, a private European infrastructure provider that is wholly owned by a consortium of the continent’s biggest banks.
More on this: ECB’s Panetta Urges Firms to Adopt EU Instant Payment Solutions
Although steps have been made to increase interoperability between the two systems, at present some banks only use TIPS, whilst others only accept RT1.
That said, it’s not all bad news. TIPS continues to grow in usage, and as of May this year has been able to settle transactions in Swedish Krona as well as Euros. There is significant market and government pressure for banks to pull up their socks when it comes to SEPA Instant accessibility.
IBAN Discrimination
Another issue affecting money movement across borders is the prevalence of International Bank Account Number (IBAN) discrimination — when a bank or company doesn’t accept an IBAN for euro payments or direct debits because it’s not from the same country in which they are based — across the region.
EU regulation mandates that banks and businesses have to accept payments originating from all SEPA member states, but from all indications, many institutions are refusing to comply.
“There are laws in Europe that say IBAN discrimination is not permitted” and organizations have to accept IBANs from different SEPA member states on equal footing, yet, “in practice, we see this isn’t happening,” Naudé noted.
In response to the issue, Wise has set up an ‘Accept my IBAN’ campaign, providing a website where anyone who has experienced IBAN discrimination can report the offending party. For example, a retailer that wants to pay for goods in Spain using their French IBAN can report a Spanish supplier who refuses to accept the non-Spanish SEPA account number.
The campaign is supported by a coalition of leading FinTechs and neobanks including Klarna, N26, Raisin, Revolut. and Bunq, and the goal is to present the discrimination cases to the European Commission and relevant authorities to further highlight the scale of the problem that exists.
See also: Modulr Unveils SEPA Instant Service for Real-Time European Business Payments
This campaign is an indication that non-governmental stakeholders with an interest in the growth of the European payments ecosystem are taking an increasingly active stance against unnecessary barriers erected by banks and other institutions.
Learn more: State of Open Banking in Europe, Africa and the Middle East
As Naudé said: “It’s something that we’re trying to raise attention to both at the consumer level, the bank level and the policymaker level, to help make change as quickly as possible. Highlighting that this is very widespread will help get the attention of the right people to enforce the rules that are already there.”
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