Cracking the Code: Understanding the EU's Instant Payments Regulation

Issue 720: 3 June 2025

Cracking the Code: Understanding the EU's Instant Payments Regulation

Thank you to SurePay for joining with Payments:Unpacked for this guest blog.

The EU Instant Payments Regulation (IPR) is set to transform the European payments landscape by making instant payments a mandatory standard for all financial institutions by 2025. This regulation mandates that payment services must be available 24/7, processed in real time, and as affordable, secure, and accessible as traditional credit transfers. For banks and payment service providers (PSPs), the IPR brings both opportunities and challenges as they must comply with these new standards while enhancing their existing infrastructure.

One of the key compliance components is the implementation of Verification Of Payee (VOP), a critical tool for fraud prevention and ensuring transaction accuracy. As the deadline approaches, it’s essential that banks begin preparing now. In this blog, we’ll discuss the key requirements of the IPR, its benefits for both banks and consumers, the challenges involved, and how SurePay can help banks seamlessly navigate this regulatory shift.

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What is the EU Instant Payments Regulation?

The EU Instant Payments Regulation (IPR) is a groundbreaking legislative initiative aimed at making instant payments the new standard across Europe. By requiring instant payment options to be as affordable, secure, and accessible as regular credit transfers, the regulation seeks to modernise payment infrastructures and boost financial inclusivity.

For banks, this means adapting to new operational standards while addressing customer expectations for seamless, secure payments.

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What Are Instant Payments?

Instant Payments are electronic payments that are processed and settled almost immediately, 24/7, 365 days a year. Unlike traditional bank transfers, which can take hours or even days to complete, Instant Payments ensure that funds are available to the recipient within seconds.

Key features of Instant Payments include:

• Speed: Transactions are processed in real-time.

• Availability: Payments can be made and received any time, including weekends and holidays.

• Certainty: Once the payment is processed, it cannot be reversed, offering finality.

• Coverage: Instant Payments are currently offered within the SEPA region and are increasingly adopted worldwide.

This speed and reliability are vital for businesses and consumers, enabling faster commerce, reducing cash flow constraints, and enhancing the overall payment experience. However, such efficiency requires robust systems and stringent security measures, which are central to the IPR.

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Why IPR Matters for Banks and PSPs

IPR is mandatory for all EU-based payment service providers (PSPs). Compliance not only avoids legal penalties but also ensures your institution remains competitive in an evolving financial ecosystem. A key feature of IPR is Verification Of Payee (VOP), a crucial tool for preventing fraud and payment errors by verifying payee details before completing transactions.

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What does the IPR require?

IPR compliance demands significant changes to payment processes.

Key requirements include:

• Coverage across channels: VOP requests must be available in all payment initiation channels at no extra cost to users.

• Support for multiple transaction types: Both Instant Credit Transfers and regular Credit Transfers require VOP verification.

• Batch payment capabilities: Banks must enable VOP checks for single and batch payments, with opt-in or opt-out options for the latter.

• Pre-authorization checks: Every transaction must undergo a VOP check before payment authorization.

• Responding to VOP requests: As a Payee PSP, banks must handle incoming VOP requests to avoid liability and protect customers.

These requirements demand robust technical infrastructure and significant process adjustments. Read more about the requirements in the VOP playbook by the EPC.

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Benefits of the Instant Payments Regulation

The Instant Payments Regulation (IPR) brings significant advantages to both financial institutions and end-users, fundamentally improving the speed, security, and accessibility of payment systems across the EU.

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For banks and payment service providers

The IPR drives innovation and operational benefits for financial institutions, including:

• Fraud reduction and liability minimisation: Verification Of Payee reduces the risk of misdirected payments and associated fraud, saving costs and protecting trust.

• Streamlined domestic and cross-border transactions: Standardisation across SEPA simplifies compliance and operational processes, reducing complexity and cost.

• Opportunities for competitive differentiation: Early compliance allows banks to position themselves as leaders in Instant Payments, attracting new clients and bolstering customer loyalty.

• Cost efficiency through modernisation: Upgraded infrastructure results in long-term savings and the ability to offer innovative payment solutions.

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For consumers and businesses

The IPR benefits end-users in numerous ways:

• Real-time transactions: Payments are processed within seconds, 24/7, eliminating delays caused by weekends or banking hours.

• Enhanced cash flow for businesses: SMEs and other enterprises benefit from faster access to funds, improving their operational agility.

• Improved fraud prevention: Mechanisms like VOP ensure payments reach the correct recipient, fostering trust in the payment system.

• Greater financial inclusion: Accessible and affordable payment services become available to a broader audience, empowering individuals and businesses of all sizes.

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Common challenges banks face with IPR compliance

Legacy systems and infrastructure

Many banks rely on outdated systems that were not designed for the speed and complexity of real-time payments. Upgrading these systems to handle 24/7 operation and high transaction volumes is both costly and time-intensive.