Miscalculated: instant payments slow down in Europe due to sanctions
Numerous sanctions have taken their toll on Europe: they are still unable to build an instant payment system. Banks reject transactions every now and then, mistakenly identifying them as being linked to persons on the EU sanctions lists. As a result, the share of instant payments in Europe is below 20%. In Russia, on the contrary, fast payments are developing rapidly. Izvestia investigated why the process of transaction acceleration in the EU has stalled and what are the key advantages of fast payments.
They have become slower
The European Union has been discussing the increase in the share of instant payments for quite a long time: as early as 2021, a full transition to fast transactions within 10 seconds within the framework of the Single Euro Payments Area (SEPA Instant) was expected. But it was only in 2023 that the European Council and the European Parliament reached a political agreement on the proposal for instant transactions.
It was expected that the new rules would increase the strategic autonomy of the European economic and financial sector and help reduce any excessive dependence on financial institutions and infrastructure of third countries. In addition, mobile money flows would benefit citizens and companies and enable the provision of innovative value-added services.
The system itself was also planned to work fairly quickly, but data from the European Court of Auditors (ECA) showed that less than 20% of euro bank transfers in the EU are processed instantly.
Watching out for sanctions
One of the key reasons is the high number of transactions rejected by banks that have been misidentified as being linked to individuals on EU sanctions lists. This barrier is very much hampering the widespread adoption of instant payments in the region, according to the Digital Payments in the EU report by ECA, an audit service that audits the EU budget and its institutions.
- Banks have increased vigilance over transactions and tightened compliance procedures. As a result, they have become slower and more cautious, rejecting suspicious transactions more often to avoid violating their sanctions regime. This has slowed down the processing time of transfers and hinders the introduction of instant payments," says Mikhail Petrov, Head of Implementation Control and Technological Development at RosDorBank PJSC.
In addition, the sanctions have diverted the attention of banks and regulators from the development of instant payment technologies, redistributing their resources to ensure compliance with sanctions requirements, the analyst points out.
Lagged behind the technology
Nikolay Pereslavsky, head of economic research at CM Service, cites a number of other reasons for the low speed of processing bank transfers in the European Union.
First, instant transfers require more modern and integrated systems, which are not available to all banks in the EU. As a result, some financial institutions still use traditional systems.
Second, there are differences in payment processing standards within the EU, which can also lead to delays.
In addition, some banks face technical problems - this may be due to insufficient automation of processes or lack of necessary technologies. Of course, the cross-border nature of transactions also has an impact.
They do not see incentives
The fact that the development of instant transfers requires investments in technology and infrastructure also becomes an obstacle, and payment service providers may not have sufficient incentives to implement them.
According to Ismail Ismailov, an expert at the ABL Research Center, high fees and the lack of incentives for distribution at the state or union level continue to be the main deterrents.
- For example, in Russia the popularization of BPS is largely due to strict tariffication and low commissions. Moreover, in Europe, fast payment services are largely developed by individual banks and fintechs on their infrastructure (Revolut, Faster Payments), rather than at the state level," the analyst explains.
"Slow" transfers create enough inconvenience for banks, businesses and households.
Delays in settlements between financial institutions and customers can cause cash gaps. Long payment processing times - lead to reduced liquidity for both businesses and banks. This makes it difficult to manage cash flow and negatively affects the ability of companies to meet their obligations. Organizations are forced to use more expensive acquiring methods, which increases their operating costs. In addition, the lack of instant payments can limit the availability of financial services, especially for small and medium-sized companies that cannot afford expensive acquiring equipment, Nikolay Pereslavsky says.
Russia is in the lead
Things are different in Russia: we are in the lead in terms of the volume of fast transfers. Instant transactions work both within a single bank and at the interbank level: since 2019, the Fast Payment System (FPS) has been operating. It uses modern encryption and authentication technologies to ensure the security of transactions.
According to the Central Bank, in the first half of 2024, about 2.3 billion transactions totaling RUB 13.4 trillion were conducted through the FPS. According to the acquiring network of Russian Standard Bank (one of the largest in Russia), the total share of transfers via SBP of all transactions from January to October 2024 amounted to 46%.
"SBP increases financial accessibility, reduces costs for businesses and stimulates innovation in the financial sector. Thus, despite the slowdown in the EU due to sanctions and strict controls, in Russia, fast payments are showing significant progress, opening up prospects for increasing the sustainability of the national financial system," financial expert Albert Bodokia points out.
According to all forecasts, the share of transactions via SBP and pay services of banks will only grow.
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