{"id":568388,"date":"2025-05-26T12:52:48","date_gmt":"2025-05-26T11:52:48","guid":{"rendered":"https:\/\/ibsintelligence.com\/?post_type=ibsi_news&p=568388"},"modified":"2025-05-26T13:07:16","modified_gmt":"2025-05-26T12:07:16","slug":"europes-banks-brace-for-real-time-payments-and-millions-in-lost-interest","status":"publish","type":"ibsi_news","link":"https:\/\/ibsintelligence.com\/ibsi-news\/europes-banks-brace-for-real-time-payments-and-millions-in-lost-interest\/","title":{"rendered":"Europe\u2019s banks brace for real-time payments \u2014and millions in lost interest"},"content":{"rendered":"

\"Europe\u2019sThere\u2019s no such thing as banking hours anymore. Weekends, evenings, holidays \u2014 they\u2019re all fair game now. With the EU\u2019s SEPA<\/a> Instant Payments Regulation set to become mandatory by October 2025, banks are being pushed into a world where euro payments must clear in seconds, 24\/7\/365. It is a landmark shift designed to modernise European payments, but it comes at a steep cost.<\/p>\n

New research by RedCompass Labs<\/a> reveals that 47% of European banks expect to lose millions in interest as they scramble to meet the regulation\u2019s round-the-clock liquidity demands.<\/p>\n

This isn’t just a technical adjustment \u2014 it’s a re-engineering of how banks operate, fund, and defend their reputations in real time. Based on a survey of 300 senior payment professionals, RedCompass Labs\u2019 report, ‘Inside Europe\u2019s Race to Instant Payments’, outlines the operational and financial hurdles banks must now overcome.<\/p>\n

Liquidity strain in a non-stop environment<\/h5>\n

One of the biggest friction points is liquidity. While the regulation mandates always-on payments, the European Central Bank\u2019s TARGET2 system \u2014 crucial for wholesale payments and liquidity management \u2014 remains available only on weekdays between 07:00 and 18:00 CET. That leaves a critical gap.<\/p>\n

To compensate, banks must pre-fund their accounts in the TARGET Instant Payment Settlement (TIPS)<\/strong> system, holding idle capital across evenings, weekends, and public holidays \u2014 capital that would otherwise generate returns through lending or investment. Nearly every bank (93%) expressed concern about this challenge, with almost half (48%) saying they are “very concerned”.<\/p>\n

The planned removal of the \u20ac100,000 transaction cap further compounds this. Without a ceiling, predicting liquidity needs becomes increasingly complex. \u201cHow much is enough?\u201d asks Pratiksha Pathak, Head of Payment Services at RedCompass Labs.<\/strong> \u201c\u20ac300 million? \u20ac600 million? \u20ac1 billion? Imagine it\u2019s a Saturday evening and multiple high-value instant payments hit your system. What then?\u201d<\/p>\n

If a bank\u2019s TIPS account is underfunded, it must reject payments until TARGET2 reopens \u2014 a failure that affects customer trust, institutional reputation, and regulatory standing.<\/p>\n

Behind the scenes: How banks are preparing<\/h5>\n

To manage the transition, banks are taking multi-pronged steps:<\/p>\n