Real-time payments (RTP), account-to-account (A2A) payments and instant payments all refer to the ability to process payments in seconds. This is one of the next frontiers in retail payments in most countries around the world. It is already a reality in countries like the U.S., Europe and the U.K., who are developing new networks and projects to boost the use of RTP.
In 2022 there have been significant regulatory developments in this space — and after the summer, more changes are expected. Take a look at what’s next in RTP.
In the U.S., RTP is currently offered by The Clearing House, a network owned by the largest banks in the U.S. But the Federal Reserve has been developing another RTP network, called FedNow, that will be fully implemented in 2023.
The Fed is also working on other regulations that will affect the operation of FedNow. For instance, in May, the Fed finalized a rule that will govern fund transfers over the new network. The final rule is similar to a proposal from last year, but some of the clarifications provided by the Fed will allow banks to have extra time to process instant payments if they believe funds may have a fraudulent origin.
The final rule allows a FedNow participant additional time to determine whether to accept a payment order only in instances where the FedNow participant has reasonable cause to believe that the beneficiary is not entitled or permitted to receive payment.
While these changes affect fraudulent payments, the protection is not extended to other cases of payment errors or mistakes. However, the Fed recognized that the irrevocable, real-time nature of instant payments can pose a challenge to the industry in detecting and preventing fraud, and it suggested that further examining of Regulation E may be the right tool to strengthen consumer protection for this particular topic.
The U.K. is very active preparing the regulatory ground to promote account-to-account retail transactions. There are different initiatives from the government and its regulators that will help in boosting the use of A2A payments.
First, the Treasury, the Financial Conduct Authority (FCA) and the Payment Systems Regulator (PSR) are designing a new regulator that will be in charge of promoting open banking and A2A payments. According to the regulators’ schedule, the new entity could be created by the end of the year or beginning of 2023.
Second, the PSR is supervising the development of a new payment architecture that will allow the UK to move all the payments systems to this new network, which will support A2A payments and allow greater scalability. The PSR is expected to publish the public contract for the development of this network soon.
Third, the PSR and the FCA are also proposing new regulations to tackle fraud in A2A payments. A new rule will likely be introduced in this parliamentary session — probably before the end of the year — and it will include some provisions requesting banks and financial institutions to refund clients when they have been subject to authorized push payments fraud.
The EU is also preparing new regulations on instant payments, and these could be proposed after the summer recess. In February, EU’s Commissioner Mairead McGuiness announced that she would submit new legislation in the second half of 2022.
The European Central Bank (ECB) is also interested in boosting the existing instant payments capabilities via SEPA Instant Credit Transfer offered by the European Payments Council (EPC). The ECB wants instant payments to be widely accessible and used, and it urged the EPC to do more to expand this network.
Last, the European Commission is also working on the revision of the second payment service directive, and the regulator could have the first draft ready by the end of the year or early 2023. This directive may focus on open banking, but it will likely have a few provisions that would facilitate the use and adoption of instant payments.