Instant payment: How it works and what benefits it offers


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  1. Introduction
  2. What is an instant payment?
  3. How does an instant payment work?
  4. What are the benefits of an instant payment?
  5. Can you recall an instant payment?
  6. How much does an instant payment cost?
  7. Which banks offer instant payments?

An instant payment is the quickest method of completing a bank transfer. In this article, you will learn what an instant payment is, how it works, how long the process takes and its benefits for businesses. We will also answer the question of whether you can recall an instant payment.

What's in this article?

  • What is an instant payment?
  • How does an instant payment work?
  • What are the benefits of an instant payment?
  • Can you recall an instant payment?
  • How much does an instant payment cost?
  • Which banks offer instant payments?

What is an instant payment?

An instant payment enables businesses to transfer money quickly – usually between five and 30 seconds – although it can sometimes take a few minutes depending on system availability and the type of bank being used. Regular online bank transfers usually take at least one working day for the money to reach the recipient's bank account.

The Instant Payment System was developed by the European Central Bank. Transfers are processed directly between banks without intermediaries such as clearing houses or correspondent banks needing to get involved. This means that transfers can be made very quickly and securely.

Instant payments are possible in any country that is part of the European payment area, known as Single Euro Payments Area (SEPA). In addition to all EU member states, this also includes other countries in the European Economic Area, such as Switzerland and the UK.

How does an instant payment work?

This payment process is based on the European Central Bank's SEPA Credit Transfer (SCT) standard. The services offered by banks and payment providers participating in the SCT scheme differ in terms of price, how long the process takes and service quality. Which means that each company can decide for itself whether it would like to use an external payment provider or their own online banking. Instant payments work throughout the entirety of SEPA provided that the other bank is also participating in the instant payment process. The maximum amount depends on the provider, but is usually between EUR 2,000 and 100,000.

Both account holders need an IBAN (International Bank Account Number) to complete an instant payment. The sender needs to enter the respective amount, as well as the recipient's IBAN and possibly other details, such as a payment reference. Then, the transaction is checked and confirmed by the bank or payment provider. The amount is credited to the recipient's account within a few seconds. Instant payments are generally just as safe as a typical bank transfer, with the same phishing and fraud checks.

What are the benefits of an instant payment?

Instant payments offer many benefits for businesses. For example, outstanding bills can be settled more quickly, which improves liquidity. Plus, business partners can be paid more quickly, which makes collaborating easier and faster. Instant payments provide much more transparency regarding incoming and outgoing payments, and also reduce the effort required to process payment transactions while still keeping transaction costs low. And because it only takes a few seconds to transfer money, transactions no longer need to be manually checked or monitored. Instant payments allow businesses to improve their cash flow, giving them more time to focus on their core business.

Can you recall an instant payment?

Instant payments do have one downside: they are difficult to recall. Unlike standard bank transfers, instant payments are set up so that the money reaches the recipient's bank account within seconds, which means it's not possible to retrieve the money via a clearing process. Cancellations, such as in the case of suspected fraud, are only possible in individual cases and also require the recipient's approval. To minimise the risk of an incorrect transfer, the company should always ensure that all of the recipient's details, such as their IBAN and name, are correct.

How much does an instant payment cost?

The cost of an instant payment varies depending on the provider and its scope of services. Many banks offer instant payments without charging additional fees, while other providers charge a fee. It's a good idea to compare different offers and check conditions closely so that you can select the best possible option.

Which banks offer instant payments?

An increasing number of banks, including some online banks, are now offering instant payments. The European Payments Council offers a complete list.

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