In light of competition from Facebook and other tech firms and banking firms, the European Union could potentially have a real-time payments system in place by 2020, according to a report by Reuters.
Instant payments have actually been available in the EU since 2017, but only around 50 percent of banks have used them, and then mostly for domestic payments. Now that Facebook has announced its planned cryptocurrency, Libra, and the threat of migration is much more real, banks are responding.
“The clock is ticking,” said Etienne Goosse, director general of the European Payments Council (EPC). Goosse said that it doesn’t matter how successful Libra is, banks need to act, and act fast.
One of the advantages of tech firms, he said, is that they are global companies, as opposed to just fragmented financial entities in one region.
“They come with a global solution, under a global brand offering many things that the consumers seem to find wonderful,” Goosse said when talking about Libra. “So we have no time.”
Goosse said that by 2020, instant payments could spread to all banks in the EU. If there’s no full coverage, some transactions could fail with banks outside of the system, and that would harm trust in the service, an EPC official said.
Instant transfers are attractive because they complete in seconds, as opposed to it taking a day before a payment is posted.
In November, the European Central Bank started a settlement system for instant payments called Target Instant Payment Settlement (TIPS). Other systems include Spain’s Iberpay or Nexi from Italy. These systems only cover a small amount of banks though, and this makes real-time payments practically impossible from financial institutions in different clearing houses.
“The challenge now is to make these mechanisms interoperable,” said Piet Mallekoote, the CEO of the Dutch Payment Association.
The Netherlands has worked out real-time payments through a project backed by its seven biggest domestic banks, which include ING and ABN AMRO.