As the SEPA Instant mandate deadline approaches, banks across Europe and beyond must prepare to comply with its requirements. This blog explores the challenges of non-European banks that must align their European branches with the SEPA Instant mandate.

The number of instant payment transactions is projected to hit 39 billion in 2028, and global real-time transactions are expected to reach $58 trillion in that same time frame — a whopping 161% increase within the next four years. Instant payments are at the center stage, including SEPA Instant, which is at a breakneck pace in transforming payments in Europe.

As the SEPA Instant mandate deadline approaches, banks across Europe and beyond must prepare to comply with its requirements. In this blog, we’ll explore some of the strategic and tactical solutions banks can consider to meet SEPA Instant’s requirements, as well as the key areas they must focus on for successful implementation.

Strategic and tactical approaches to SEPA Instant compliance

Successfully implementing SEPA Instant requires a thorough assessment of current systems and processes, the selection of appropriate solutions, and open lines of communication with regulatory bodies to ensure compliance.

To navigate the SEPA Instant landscape, banks must rigorously assess how current systems handle instant payments, identifying bottlenecks and challenges, especially for non-Euro Tier 2 and 3 banks where SEPA Instant may be more costly than beneficial. Collaborating with payments experts and solution architects is key to designing an effective solution. A combination of strategic system overhauls and tactical interim measures may offer flexibility in managing costs, timelines, and system design while minimizing downtime.

A crucial requirement for SEPA Instant is 24/7/365 real-time processing, which challenges traditional batch-processing models. Financial institutions must upgrade their systems to handle continuous operations and may consider tactical solutions, like a shadow balance store, which ensures immediate transaction processing and mitigates downtime risks. Evolving operating models to support 24/7 availability, enhanced incident management, and updated business continuity plans will be necessary for compliance and competitiveness.

Additionally, maintaining continuous dialogue with regulatory bodies like the EPC, EBA, and Central Banks is essential for navigating evolving guidelines and ensuring compliance through clear, actionable steps. Starting early with both long-term and short-term solutions will be crucial for a smooth transition to SEPA Instant.

Exploring implementation approaches

There are three main approaches to achieving SEPA Instant compliance, each with distinct benefits and challenges:

1. Upgrading existing SEPA systems: This approach allows for faster onboarding, lower latency, and reduced manual effort. Operational consistency is maintained with minimal disruption to processes. However, the significant downtime and high costs can deter institutions from modernizing.

2. Adding a new SEPA Instant system alongside the existing one: This avoids disruption to core banking systems, enabling banks to assess the impact of SEPA Instant while focusing on scalability. The downside is running two systems simultaneously, which increases costs and risks over time.

3. Replacing the current system with a single SEPA payment system: Utilizing a third-party cloud-based platform offers benefits like direct connectivity, built-in compliance updates, and reduced operational costs. However, this approach introduces risks related to vendor dependency and requires thorough integration with other internal systems.

Each approach offers unique advantages and trade-offs, and banks must carefully evaluate their specific needs and risk tolerance to select the best path to SEPA Instant compliance.

SEPA Instant compliance as a competitive edge

For non-European banks, complying with SEPA Instant is more than just a regulatory requirement—it’s an opportunity to enhance their competitiveness in the fast-evolving global payments landscape. By adopting the right blend of strategic and tactical solutions, upgrading technological infrastructure, and working closely with regulators, banks can not only meet the SEPA Instant deadline but also set themselves up for future growth in the digital payments space.

For more on changes in the SEPA Instant mandate, download our “Instant payments require instant action” insight report, in association with Valentia Partners.