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Instant credit transfers, a new era in digital payments

Thanks to the progress in technology and to legislation, payment methods have constantly evolved over time to meet consumers' and firms' needs and make access to payment services easier.

One of the first revolutions in payment methods was the introduction of ATMs, which Paul Vorcker (former chairman of the Federal Reserve board) said was '...the most important financial innovation that I have seen the past 20 years...' in a 2009 interview. These machines make it possible to withdraw cash and make payments at any time, day or night.

Digital payments and instant credit transfers

The introduction of digital payments broke down geographical barriers: thanks to credit transfers, for example, we can make payments and send money anywhere in the world. In addition, credit transfer orders can be cancelled within a certain period of time before the beneficiary receives the payment.

While paying cash immediately extinguishes a debt, credit transfers initially took several days to be credited to the beneficiary0s account. Technological developments have steadily reduced the time lapse, and now a credit transfer normally takes just one business day.

For some years now, many intermediaries have been providing their customers with faster credit transfer services throughout Europe, 24 hours a day, 7 days a week via instant bank transfers. The adoption of instant payments is increasing in both Europe and Italy. As the name suggests, the money gets to the beneficiary instantly, regardless of distance.

The increased transfer speed is a great advantage in itself. However, while the risk for the beneficiaries (merchants, companies, public administrations and people) of not collecting their credit becomes null, the risks for payers increase. Instant bank transfer orders cannot be cancelled, as a money transfer becomes effective the moment the payment order is placed. Due care and attention are therefore necessary when checking the beneficiary's IBAN before initiating an instant credit transfer.

It is estimated that the fraud frequency rates of instant credit transfers are higher than those of non-instant credit transfers. This is not surprising, because fraudsters take advantage of the very short time span between the payment initiation and the actual transfer of the money to their account.

How are instant credit transfers going to change?

A new European Regulation, already published in the Official Journal of the Italian Republic and which will gradually enter into force in 2025, will strengthen user protection and increase competition in the sector by defining cost limits and encouraging the use of instant payments.

Starting from 9 January 2025, banks and Poste Italiane, which already provide an ordinary credit transfer service, have to allow their customers to receive instant payments. Furthermore, if they already provide an instant transfer service, they will not be allowed to charge higher fees than those for non-instant credit transfers. As of 9 October, banks and Poste Italiane that already provide ordinary bank transfer services will also have to provide instant credit transfer services, at costs no higher than those charged for ordinary bank transfer.

These obligations will apply as of 2027 for other intermediaries providing accounts and payment services (electronic money institutions, EMIs and payment institutions, PIs).

Security of digital payments

Security is an important issue: banks and other instant payment service providers will have to enable users to check that the IBAN matches the name of the beneficiary before initiating a credit transfer, at no additional cost. This obligation will apply to both ordinary and instant credit transfers; it will be particularly important for us, because it will help us avoid making payments to the wrong payee.

In the meantime, we should all be careful when we enter or type an IBAN to make a payment, whether it is an instant or an ordinary transfer.

No intermediary is responsible for the people we choose to send our money to!

We have to take special precautions when making electronic payments, and it is actually up to us to take all the necessary measures to prevent fraud and keep our authentication details safe. Banca d'Italia's awareness campaigns on the dangers of digital scams include some key recommendations:

Never show your codes and passwords to anyone.

Never click on links received by email or text message.

Never share your credentials with anyone who phones you claiming to be your bank.

If we behave diligently, we're protected and can be reimbursed by our bank for any suspicious transactions that we don't recognise.

In any case, if we experience unfair behaviour on the part of our bank or other intermediary, we can file a complaint with the intermediary itself, or send a complaint to Banca d'Italia. If we're not satisfied with the answers received, we can also appeal to the Arbitro Bancario Finanziario (Banking and Financial Ombudsman).