As European banks race to meet the October compliance deadline for the mandatory rollout of Sepa Instant Payments, nearly half anticipate significant interest losses due to new liquidity requirements. A survey by RedCompass Labs of 300 senior payments professionals reveals that while 24/7 euro payment processing will increase operating costs, the majority still view the change as ultimately beneficial.
The challenge stems from the need to keep funds pre-funded in the Target Instant Payment Settlement (TIPS) system to ensure liquidity during nights, weekends, and holidays. This is necessary because the ECB’s Target2 system—used for wholesale payment and liquidity management—only operates during weekday hours. The result is idle capital held in non-interest-bearing central bank accounts, or costly borrowing via marginal lending facilities.
Banks are also preparing for the removal of the €100,000 transaction cap, which will complicate liquidity forecasting. Nearly all respondents (93%) are concerned about the increased unpredictability, with nearly half saying they are “very concerned”.
In response, many banks are taking proactive measures: nearly half are increasing liquidity buffers, upgrading fraud and sanctions screening tools, adjusting risk frameworks, and entering bilateral agreements with peer institutions to manage exposure limits.
Sanctions screening is also proving to be a critical bottleneck. Over 50% of banks reported a 30-50% rise in payment rejections under Sepa Instant, which mandates transaction clearance within 10 seconds. To cope, two-thirds of banks plan to adopt AI to reduce false positives and enhance the efficiency of transaction monitoring.
Despite the financial and operational pressures, 83% of banks believe the benefits of instant payments will outweigh the costs. Although many struggled with the initial January compliance milestones, 85% are confident they will meet the final October deadline.