Economy
Can Europe’s new instant payments rules turn regulation into opportunity?

As Europe prepares for the Instant Payment Regulation (IPR) to take effect in January 2025, the promise of instant euro transfers within seconds brings unmatched convenience – but also serious risks, writes Peter Reynolds, CEO, ThetaRay (pictured).
For banks and payment service providers (PSPs), the challenge is not just to process payments faster but to ensure that defense systems safeguarding from money launderers and terrorists attempting to take advantage of the speed of the system, are able to keep pace.
The regulation mandates that all payments be processed instantly, cost no more than standard transfers, and comply with strict anti-money laundering (AML) and sanctions-screening rules. These measures aim to create a seamless, secure, and transparent payment network across Europe. But moving money in seconds also increases risks, forcing financial institutions to adopt smarter technologies and tighter security practices.
Much like the earlier SEPA Instant Credit Transfer system that enabled near-instant payments, IPR sets a higher standard for financial compliance. PSPs in Europe must strengthen how they verify customers, track transactions, and confirm payment recipients’ identities. These aren’t just regulatory requirements – they’re essential steps for earning customer trust and staying competitive in a crowded market.
To comply, PSPs need systems that can verify customer identities with extra security checks like biometric authentication and multifactor verification. They must also use Verification of Payee (VoP) services, which confirm that the person receiving a payment is who they claim to be. Skipping these steps could expose institutions to financial crimes and harsh regulatory fines.
Older compliance systems designed for slower payments can’t keep up with the speed of instant transfers. With IPR, banks and PSPs must use advanced technologies like artificial intelligence (AI) and machine learning (ML) to monitor transactions and detect suspicious activity in real time.
AI can spot unusual patterns, such as transfers designed to bypass detection or money sent to high-risk regions. These systems can flag questionable transactions within minutes, giving banks early detection abilities to prevent escalation of financial crime.
AI’s true advantage lies in its ability to adapt. Unlike older systems that rely on fixed rules needing constant updates, AI-driven solutions learn from new data and evolving financial crime tactics. This makes them crucial in a fast-changing environment where criminals are always finding new ways to exploit the system.
AI also helps by automating much of the compliance process. It improves prioritization of high-risk cases, reduces false alarms, ensures regulatory reports are accurate, and processes thousands of transactions quickly – tasks that would overwhelm human teams. Automation has become essential as transaction volumes surge.
“Speed is irrelevant if you are going in the wrong direction,” said Mahatma Gandhi. This insight resonates strongly in the world of financial compliance. Fast transactions must be matched by fast, accurate monitoring and screening processes. Getting it wrong can mean regulatory penalties, costly delays, and damage to a company’s reputation. But most importantly, it can cap growth. Beyond enhanced oversight, regulators have historically capped financial institution’s growth for several years following compliance failures.
Banks and PSPs must take a risk-based approach to compliance. This means assessing transactions based on factors like payment amount, location, and who’s involved. Low-risk payments between trusted banks should clear immediately, while riskier transactions – such as cross-border transfers involving unfamiliar entities – must trigger extra checks.
To manage this, compliance systems need real-time screening tools powered by AI and automated workflows. These systems must handle thousands of payments per second, ensuring that every transaction is screened without causing delays. The stakes are high: customer trust, regulatory compliance, and operational efficiency all depend on getting this right.
While IPR imposes strict rules, it also offers growth opportunities. Compliance shouldn’t be seen as just a regulatory hurdle – it can be a strategic business asset. By building strong compliance systems, PSPs can mitigate risk, gain customer trust, and unlock new revenue streams.
With IPR’s rollout fast approaching, financial institutions must act now. They need to evaluate their current systems, invest in AI-driven compliance technologies, and train staff on the latest rules and tools. Moving from simple transaction monitoring to full customer risk profiling will be essential to mitigate risks and detect financial crimes as early as possible.
The future of payments is instant – and so must be the defenses that secure them. In a world where money moves in seconds, financial institutions can’t afford to respond slowly. Success means anticipating risks, adapting quickly, and building systems that inspire trust. Those ready to meet this challenge won’t just survive regulatory scrutiny – they’ll lead the way in creating a safer, more prosperous and trustworthy financial future.
Peter Reynolds is ThetaRay’s CEO and the driving force behind the company’s vision to become the industry standard in AI-powered AML. He is an accomplished fintech executive with extensive experience building world-class, high-performing organizations.
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