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Since October 2024, European banks have been legally required to offer instant credit transfers in euros, at no extra cost to the sender, processed within ten seconds, available around the clock.
The regulation is called the Instant Payments Regulation. It passed the European Parliament in February 2024 and took effect on a phased timeline that made instant transfers mandatory for eurozone banks by January 2025 and for non-eurozone EU member states by July 2027.
The stated purpose was financial inclusion and payment efficiency. The structural consequence is something larger.
What instant bank transfer actually replaces
Visa and Mastercard are not payment networks in the technical sense. They are clearing and settlement networks that sit between banks and merchants, verifying that a buyer has funds, guaranteeing payment to the merchant, and settling the transaction over a period of days while taking a fee on each transaction.
That fee, typically between 1.5% and 3.5% of transaction value for card payments, is not small. For European commerce, which processed approximately 130 billion card transactions in 2023, the aggregate transfer to US-domiciled card networks runs to tens of billions of euros annually.
Instant bank transfers eliminate the need for the intermediary. If a payment moves directly from a buyer's bank account to a merchant's bank account in under ten seconds with guaranteed settlement, the clearing function that Visa and Mastercard provide becomes redundant for that transaction.
The regulation does not ban card payments. It creates a competing infrastructure that is faster, cheaper, and legally mandated to be universally available. What happens to card payment volume over the following decade is a market question, not a regulatory one.
The sovereignty dimension
Visa is headquartered in San Francisco. Mastercard is headquartered in Purchase, New York. Both are subject to US law, including the provisions that allow American authorities to access transaction data for investigative purposes.
European payment data flowing through US-domiciled networks has been a regulatory concern since the SWIFT data transfer controversy of the mid-2000s, when it emerged that the US Treasury had obtained access to SWIFT's transaction records following 9/11. The legal framework under which that access occurred has never been fully resolved in European law.
An instant payment system built on European banking infrastructure, governed by the European Central Bank's TARGET Instant Payment Settlement system, does not have this exposure. The transaction data stays within European-regulated institutions under European law.
The ECB's decision to exclude Amazon and Microsoft from Digital Euro infrastructure, covered in an earlier issue, and the Instant Payments Regulation share the same underlying logic. European financial infrastructure, for payments, for the digital currency, for the settlement layer that commerce runs on, is being rebuilt on sovereign foundations.
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What this creates for builders
The Instant Payments Regulation creates a mandatory infrastructure layer that does not yet have a complete application ecosystem built on top of it.
Payment initiation services, the software that triggers an instant bank transfer on behalf of a merchant or user, are regulated under PSD2 and its successor framework. Building a compliant payment initiation service for the European market is a defined regulatory path with clear licensing requirements and a large addressable market.
The merchants, marketplaces, and platforms that currently pay 2% to 3% per transaction to card networks have a structural incentive to migrate to instant bank transfer alternatives as consumer adoption grows. The infrastructure is mandated. The consumer-facing applications, checkout experiences, merchant dashboards, reconciliation tools, dispute handling systems, are not yet built at the scale the regulation implies.
The US market has its own instant payment infrastructure, the FedNow system launched in 2023, but adoption there is voluntary for banks and driven by market incentives rather than regulatory mandate. The European situation is different: the mandate creates a floor of availability that makes building on top of it a calculable bet rather than a speculation on adoption.
For builders outside the payments space, the broader signal is the same one the operating system migration and the cloud exclusions have been sending. European institutions are building sovereign alternatives to US-controlled infrastructure across the full stack: communications, operating systems, cloud, satellite, currency, payments. Each layer that moves creates procurement demand for the application layer above it.
404 Found covers AI developments from a European Insider, three times a week.
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