Traditional retail payment systems do not match the immediacy and ubiquity of digital processes in commerce and social life. In several countries, instant payment systems have been introduced to bring payments up to the speed of digital processes, but also for more general economic reasons like infrastructure modernisation or financial inclusion.

Instant payments come in different shapes and sizes. Instant may simply mean the issuance of a payment guarantee to the payee in real-time. The ECB, though, defines instant payments as real-time crediting of the payee’s account.

In the euro area, the ECB calls for the establishment of a pan-European instant payment solution, building on SEPA. The aim is to prevent a re-fragmentation of the euro payments market through instant payment systems developed for national markets only.

However, different technical and organisational set-ups can feasibly provide real-time services: The main alternatives are closed-loop transfer structures, open-loop payment systems or decentralised payment networks.

Mobile payments will be an attractive alternative to cash payments if executed instantaneously. In other use cases, instant payment execution will be an upgrade of existing electronic payment solutions and a platform for further service innovation.

The development of instant payment solutions opens up opportunities for new processes, technologies and providers. The type of payment service provider also determines the type of money transferred: bank deposits, e-money or privately issued money.

Reach and large transaction numbers: Widespread use by payers and payees, as well as providers’ ability to process large numbers of transactions will remain crucial for success in retail payment services, also in real-time, and regardless of the technical set-up.

The rule ‘same business, same regulation’ needs to be applied to safeguard the operational and transparency standards achieved in the payments market. Besides, a level playing field for all payment service providers will foster innovation and competition, rather than regulatory arbitrage.

What are instant payments?

Payments that are completed instantly, of course! From the user’s perspective, a payment is completed once the payee has received the money. However, this is not as trivial a question as it seems, especially in the case of non-cash payments.

When speaking about electronic payments, “instant” (also “immediate”, “real-time”) means less than one minute, ideally only a few seconds. There is a general understanding that the payer and the payee of an instant payment will receive speedy payment confirmation. Making a more detailed examination, however, there are various definitions of “instant”: the instant issuing of a payment guarantee to the payee, or the instant crediting of the payee’s account. The latter means that the beneficiary can immediately re-use the funds for another transaction.

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