Writing for Payment Expert, Jose Luis Calderon, CEO of PagoNxt Payments, explores why there is still resistance to real-time payment adoption amongst leading financial institutions, and why not implementing their convenience puts them at risk of falling behind next-generation fintechs and neobanks.
Convenience is the critical element in influencing what consumers buy, which services they use, where they travel and who they interact with. Arguably, it has become the dominant expectation in today’s society.
Financial transactions are no exception to the rule. SEPA Instant has arrived as Europe’s answer to these rising expectations, promising fund transfers settled within seconds and available continuously. Yet despite the clear trajectory toward instant payments as the new normal, a concerning preparedness gap has emerged: fewer than 5% of European banks currently have the robust infrastructure needed to comply with mandates that became effective earlier this year.
As the October deadline for implementing sending capabilities approaches, this readiness gap represents more than regulatory non-compliance. Instead, it signals a potential competitive disadvantage in a market where customer demand for instant payment solutions is expected to double from 19% to 40% by year-end, according to SBS Software research.
Why banks have fallen behind
It isn’t just consumers who stand to benefit from this shift toward convenience through instant payments. Having witnessed the transformation firsthand, I can attest that SEPA Instant offers banks increased efficiency and faster transaction processing that will stimulate economic activity and enhance liquidity for businesses and consumers both inside and outside Europe.
Additionally, financial institutions have the opportunity to attract and retain customers through these enhanced payment services that align perfectly with modern expectations for immediacy.
Many institutions, however, appear to be underestimating the profound impact of this transition. SEPA Instant should not be viewed merely as a regulatory requirement to fulfil, but rather as a transformative opportunity to redefine payment services. This is precisely the kind of innovation banks should be eager to champion. Yet the current low readiness level serves as a stark warning – the consequences of inaction will be significant as convenience-focused competitors capture market share.
The root cause of this preparedness gap can be traced to three interconnected challenges facing traditional banking institutions. First, the limitations of legacy infrastructure present major obstacles, with systems unable to handle the speed, volume, and security requirements essential for real-time payments. These outdated platforms cannot simply be patched. Meaningful investment in new technology is imperative.
Second, integrating instant payment capabilities with existing banking systems creates considerable complexity. Establishing secure connections while simultaneously enhancing anti-money laundering measures and fraud prevention – all critical components – adds layers of technical challenges that many institutions haven’t fully addressed.
Third, a widespread underestimation of the processing capacity required for instant payments threatens to create bottlenecks as demand grows. Research from RedCompass Labs reveals European banks typically aim to process only 100-300 payments per second, when real-world requirements will demand at least 1,000 payments per second. This capacity miscalculation could severely impact service delivery as convenience-driven consumers increasingly shift to instant payment options.
Another significant operational challenge is the transition to 24/7 availability – a fundamental aspect of genuine convenience. This shift from traditional banking hours requires a complete overhaul in how financial institutions function. The impact of moving from a 24/5 to 24/7 operating environment onto intraday liquidity demands further adaptation in how banks manage their cash positions, with implications for central bank funding requirements and money market operations.
Staffing patterns must also evolve to provide round-the-clock support, accelerating operational tempo changes that could disrupt established banking cultures.
Pathways to seamless adoption
While these hurdles are significant, there are simple solutions if executed correctly. Success requires a multi-faceted approach that begins with a thorough infrastructure assessment. Banks must identify integration gaps, processing capacity limitations, and compliance vulnerabilities before making targeted investments. For some institutions, this will mean complete modernisation of payment systems, while others might benefit from tactical deployments such as stand-in modules that ensure continuity during the transition.
The verification of payee requirement represents another critical element that must be addressed by October, further intensifying implementation pressure. Systems verifying that IBANs match intended recipients’ names – a feature not previously mandatory in SEPA credit transfers – are now required. Selecting solution providers with seamless integration capabilities and comprehensive geographic coverage will be crucial in creating distinctive customer experiences that differentiate banks in this increasingly competitive landscape.
Though the road ahead presents challenges, SEPA Instant offers all financial institutions a strategic opportunity to innovate and distinguish themselves. Banks approaching this mandate with vision will transform what might appear as an obligation into a leadership opportunity. Business clients particularly stand to benefit from these innovations by gaining payment certainty, operational efficiency, and potential cost savings through reduced interchange fees compared to traditional card payments.
SEPA Instant represents a determined effort to enhance the euro’s international role and increase the interoperability of European P2P and P2M solutions, providing added value to individuals and merchants throughout the EU. Financial institutions that align with this vision will create new pathways to success.
This regulatory shift marks just the beginning of customer-centric solutions that will clearly distinguish market leaders from followers at a time when convenience has become the ultimate competitive advantage.
