The rise and fall of MTEUROPAY in Malta, what comes next?

MTEUROPAY is a great initiative launched by the Central Bank of Malta (CBM) in 2020. It is a payments system that offers Euro settlement to its participants through the EBA Step 2 platform. The service provides Credit, Financial and Payment institutions the ability to process SEPA payments (Euro payments) including SCT and SDD at a reasonable cost. This is similar to the hugely popular CENTROLINK which is offered by the Central Bank of Lithuania.

Unfortunately it’s days seem to be counted. In a surprise move, the Central Bank of Malta has informed participants that it has no intention of supporting SEPA Instant which will be mandated by 9^th January 2025 for Banks and later for Financial Institutions. SEPA Instant are transfers in Euros that are executed instantly on a 24/7/365 basis and reach the recipient within seconds.

The decision not to support instant payments makes MTEUROPAY an unattractive choice for Credit and Financial Institutions since they would need to connect to it solely for traditional SEPA Payments and then find an alternative provider for Instant payments. The alternative provider would most likely offer both regular and instant payments.

The Central Bank offering does have some other limitations, for instance it does not pass on any interest to its participants, nor does it offer ancilliary services such as FX conversions or cross-border payments. I believe this to be the same situation with CENTROLINK.

Whilst it clear that the CBM is no longer committed as it once was to support its payment services, there is now a new option locally and of course several options across the EU. In the local payments services scene, Multitude Bank is now offering payment services to FI’s which is very welcome news. Internationally, there is of course a plethora of Banks and EMI’s offering SEPA connectivity.

Currently Banks are able to connect directly to the payment systems whilst FI’s connect through Banks. When PSD3 comes along, all EU licenced Financial Institutions (PI’s and EMIs) will be able to connect directly to the payment systems meaning they will be legally authorised to become direct SEPA participants and connect directly with SEPA. This change will further facilitate Euro payments across the EU and ultimately create even more choice for consumers.

The positve developments in the payments space in Europe in terms of connectivity for FI’s and mandated instant payments are set to continue to powering Fintech and Digital Banks in a big way. The costs to indivudual consumers for making a SEPA payment is shifting towards free. Locally, Moneybase and others are already offering SEPA payments for free, this of course means that when SEPA Instant comes along, it will also be free.

In the meantime, the MFSAC is seemingly still backing a National Payments Infrastructure and Hub, an initiative it announced during its Strategy launch in February 2023 (pg23.). During the course of the 18 months since the launch of the strategy no consultation paper has been produced. The developments within the EU payments space beg the question, why would Malta invest so much time and energy to create a national payments hub especially for Malta when instant payments will shortly be available across all EU countries? Additionally, why would local institutions invest in the resources required to connect to such a specific national payments system given how easily accessible SEPA is for Banks and FI’s whilst also giving them access to make payments across the entire Eurozone?

As the payement space continues to evolve at an accelerated pace, it is going to be interesting to see SEPA Instant become the new norm whilst during the same period, the Markets in Crypto-Assets (MiCA) regulation will harmonise regulation for Crypto Assets across the EU giving much needed protection to consumers across all member states but also indirectly encouraging banks to soften their stance on Crypto assets which in turn will fuel innovation further.