Payments Insights #4 –
Compliance with the Instant Payments Regulation

Compliance with a key component of the EU’s Instant Payments Regulation (“IPR”) is mandatory as of the 9^th of January 2025.

The IPR, whose full name is Regulation (EU) 2024/886 of the European Parliament and of the Council of 13 March 2024 amending Regulations (EU) No 260/2012 and (EU) 2021/1230 and Directives 98/26/EC and (EU) 2015/2366 as regards instant credit transfers in Euro, was promulgated in April 2024, and mandates instant euro credit transfers across EU member states.

As of the 9^th of January 2025, all payment service providers (“PSPs”) operating within the euro area must have systems in place to receive instant credit transfers. These transfers must be processed in real-time, ensuring that funds are credited to the payee’s account within 10 seconds of initiation.

As stated in Article 5a of the IPR, “the payee’s PSP shall, within 10 seconds of the time of receipt of the payment order for an instant credit transfer by the payer’s PSP, make the amount of the payment transaction available on the payee’s payment account in the currency in which the payee’s account is denominated and confirm the completion of the payment transaction to the payer’s PSP.”

In addition to the obligation to receive instant payments, there is also a requirement to provide a sending service starting from 9^th October 2025.  Sub-paragraph 8 of Article 5a of the IPR provides that: “PSPs as referred to in paragraph 1 that are located in a Member State whose currency is the euro shall offer PSUs the payment service of receiving instant credit transfers in euro as laid down in this Article by 9 January 2025, and the payment service of sending instant credit transfers in euro as laid down in this Article by 9 October 2025”. Additionally, the IPR mandates that any charges for instant payments must not exceed those applied to standard credit transfers of a similar type.

At its core, the IPR ensures that payment service providers offering standard credit transfers must also provide instant payment options, thereby guaranteeing that transactions are processed within seconds. This provision eliminates delays, enabling businesses and consumers to send and receive funds at any time, irrespective of weekends or public holidays. To make instant payments accessible, the IPR stipulates that providers cannot charge higher fees for instant payments compared to standard credit transfers.

The IPR also addresses security and transparency by requiring payment service providers to offer a payee verification service. This mechanism allows payers to confirm the identity of the payee before executing a transaction, thereby reducing errors and fraud. In practice, this also allows real-time sanctions screening for instant payments and ensures that transactions adhere to EU sanctions without causing processing delays, thereby maintaining the balance between security and speed.

Benefits of setting up payment institutions in Malta

Malta is an attractive jurisdiction for setting up payment institutions and payment service providers due to its robust regulatory framework, competitive tax regime, and strategic location within the European Union. As a member of the EU, Malta offers seamless access to the Single Euro Payments Area (“SEPA”), enabling payment service providers to operate across borders efficiently within a unified market. This strategic advantage positions Malta as an ideal base for payment institutions seeking to expand their reach within Europe.

The Malta Financial Services Authority (“MFSA”) plays a key role in fostering a business-friendly environment for payment service providers. With clear and supportive regulatory guidance that aligns with EU directives, the MFSA ensures that payment institutions can meet compliance requirements within a stable legal framework. Malta’s regulatory approach balances oversight with a practical understanding of the operational realities faced by businesses, offering institutions the flexibility to tailor their operations through non-EU outsourcing while adhering to fundamental EU principle of administrative proportionality.

In addition to regulatory benefits, Malta’s favourable corporate tax structure provides a significant incentive for payment service providers. Competitive tax rates, coupled with various financial incentives, create an attractive environment for companies looking to establish or expand their presence in the financial services sector. This advantage is further enhanced by Malta’s advanced digital infrastructure, which supports the efficient and secure operation of payment systems.

Malta also offers streamlined pathways for the relocation of founders, executives, and skilled professionals. Initiatives such as the Malta Global Residence Programme, the Malta Startup  Residency Programme, the Key Employment Initiative, and the Malta Permanent Residence Programme grant employers access to talent from non-EU regions, including the Middle East, China, USA, South Africa and Latin America. These programmes facilitate the movement of highly skilled individuals, making it easier for payment institutions to assemble the teams necessary to drive innovation and growth.

Furthermore, the process of setting up a company in Malta is straightforward, supported by a specialised registry dedicated to legal entities, including companies, trusts, and partnerships. Maltese company law, rooted in English Common Law, offers clarity and reliability, while the country’s recognition and regulation of trusts further expand the options available to businesses.

Malta’s strategic advantages, including its fintech regulatory framework, access to the EU single market, favourable tax environment, English company law, proportionate outsourcing allowances and skilled workforce, position the island as an ideal base for obtaining a payment institutions licence to service the EU market.