SEPA’s instant shift: The wake-up call for Europe’s banks

Nadish Lad, Managing Director and Global Head of Strategic Business at Volante Technologies  

Consumers and businesses aren’t concerned with regulatory checklists or compliance timelines – they care about speed and outcomes. In a world where moving money across borders can take 10 seconds or less, anything slower feels archaic. SEPA Instant Payments (SEPA IP) has already made this a reality across much of the eurozone.

This shift isn’t just about faster transactions – it’s about rising expectations. Faced with a choice between a provider offering instant euro payments and one that still relies on batch processing, customers will vote with their wallets.

That puts serious pressure on banks still operating with legacy systems. October’s mandate for outbound instant eurozone payments is fast approaching and driving a renewed push for transformation. While many have met the January 2025 deadline for receiving instant payments, with around 100 countries now offering an instant payments scheme, the next phase is more complex. Non-EU banks may have until 2027 to comply, but delaying action would be a strategic mistake.

Fortunately, banks are investing in modernisation. Nearly half (49%) have increased their payments modernisation budgets, and 88% plan to spend between $500,000 and $5 million in the next year, according to recent research. The gap between compliance and customer expectations is narrowing fast – and the race to real-time payments is well underway. But unlocking real-time speed, within ageing systems is the real challenge – and one that calls for new thinking.

Unlocking speed within legacy constraints

Legacy systems were never designed for instant payments. Historically, banking systems operated comfortably on batch processing schedules – downtimes were predictable, and maintenance windows were scheduled. Then SEPA IP came along and eliminated such luxuries, mandating a constant readiness that legacy systems cannot sustain. 

Unfit technology isn’t the only problem non-EU banks face. Their infrastructure often sits in distant time zones, designed for settlement during their own domestic business hours. Banks now have two gaps they must bridge: the tech chasm between current legacy abilities and where they need to be, and the geographical divide between business and customer. They must work out how to bridge them without sacrificing day-to-day service.  

Minor tweaks to legacy systems are inadequate. Ripping out old infrastructure and replacing it with a modern core is largely unworkable, despite any long-term benefits – it’s an incremental approach that will help banks bridge these gaps. Progressively aligning legacy systems with SEPA IP’s 24/7/365 model should be an immediate priority for non-EU banks, allowing them to swiftly meet regulatory deadlines and increased customer expectations without major disruption. 

Meeting instant demands without compromising control 

Another consideration for non-EU banks is how real-time transactions fundamentally alter liquidity management. Traditional liquidity frameworks, established around batch processes and fixed settlement windows, now face obsolescence. Yet many banks are still managing liquidity with manual processes and spreadsheets. This won’t work with SEPA IP. Under this new system, liquidity needs are immediate and continuous – demanding dynamic management that legacy systems were never designed to accommodate. 

Banks need to be able to predict and manage liquidity in real-time. Accurate, instant forecasting is crucial in minimising operational risks and avoiding costly liquidity shortages. Automation and analytics tools can be of huge assistance here: a sophisticated analytics platform can provide real-time visibility into liquidity positions and automation technology can instantly reposition funds in response to transactional demands. 

A further step financial institutions should take is restructuring their treasury operations. They need to ensure these operations are aligned more closely with instantaneous payment flows so they don’t slow things down. Such changes, combined with the steps above, allow banks to move from sluggish legacy processes to active, real-time liquidity management that enables banks to boost operational efficiency, significantly reduce system risk exposure, and respond swiftly to changing market dynamics. 

Building infrastructure for the speed economy

SEPA IP has ushered in a transformative era for financial services, one that innately rejects the sluggish technology and manual workflows of traditional banking. Both EU and non-EU institutions must critically evaluate and modernise their infrastructure to meet the demands of instantaneous finance and the new velocity of commerce.

The foundation of this transformation lies in architectural evolution. Payment engines must transition from monolithic structures to modular frameworks that inherently support ISO 20022 – the universal language of contemporary financial messaging. This standardised format unlocks sophisticated data capabilities that transcend basic transaction processing, enabling banks to develop premium services, strengthen fraud prevention, and extract valuable customer intelligence.

ISO 20022 integration represents a cornerstone of SEPA IP compliance, while creating pathways for enhanced cross-border efficiency and automation. Both of which are essential for instant payment delivery and superior customer experiences. However, successful migration from legacy infrastructure demands embracing cutting-edge architectural principles.

Cloud computing emerges as an enabler, delivering improved operational resilience, reduced latency, and seamless scalability. The cloud’s inherent elasticity manages unexpected transaction volumes, while API integration becomes vital for enabling swift, secure communication across diverse payment channels and internal platforms.

Compliance becomes an innovation catalyst

Traditionally viewed as burdensome obligations, compliance measures such as SEPA IP are now seen as opportunities to drive innovation and enhance business operations. 

For example, in the UK, while this is not a regulation, research shows that some banks are moving towards this change proactively. One in seven (14%) UK banks already offer SEPA IP, and another 25% are close behind. 

For many non-EU banks, initial steps involve cloud-based “thin-layer” strategies – ISO-compliant gateways that connect new requirements to legacy systems. But these quick fixes only go so far. Sustainable competitive advantage lies in deeper transformation – reconstructing settlement processes to keep pace with evolving regulations while maintaining strategic agility. 

The foundation for this transformation is efficiency-driven design. In this model, SEPA IP becomes a catalyst for innovation rather than a mere compliance requirement.

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