Mairead McGuinness proposed a draft EU law that will require banks across the 27-country union to offer and receive "instant payment" (IP) services for a fee that is the same or lower than they charge for traditional credit transfers.
Currently, some banks charge far more for an IP transfer, up to 30 euros ($30) in some cases, compared with traditional transfers.
"Moving from 'next day' transfers to '10 seconds' transfers is seismic and comparable to the move from mail to e-mail," McGuinness said in a statement.
Instant payments have been rolled out in many parts of the world, including the EU, but voluntary take-up in the bloc has flatlined, with only two-thirds of banks offering IP which accounts for only about 13% of all credit transactions.
U.S. duo Visa and Mastercard dominate cross-border card payments, and Brussels hopes that IP, combined with reforms such as "open banking", or fintechs using a customer's bank data to offer a range of services, will boost competition.
IP is part of helping wider reforms, such as the anticipated digital euro.
"By mandating instant payments, the biggest blockers to open banking payments becoming mainstream are instantly solved," said Tom Greenwood, CEO of instant payments gateway Volt.
IP allows people to receive and make instant payments 24/7, critical if payday falls on a weekend, and for businesses to manage their cash flows by receiving funds instantly after a sale.
Once in force, the proposed law, which needs approval from EU states and the European Parliament, would require euro area banks to receive euro IPs within six months, and ability to send euro IPs within a year, with banks elsewhere in the EU given 24 months to offer euro IP services.
"This will increase competition in payment services and provide consumers and merchants an additional, efficient and lower-cost choice in paying for goods and services both in store and online," said Christel Delberghe, director general of EuroCommerce, which represents the retail and wholesale sector.
Banks will have to screen daily their IP customers against the most updated EU sanctions list, which has expanded since Russia's invasion of Ukraine.
Currently, non-bank payment firms are excluded as they don't have direct access to payment systems, but Brussels plans to revise its rules to allow them to compete alongside banks in IP payments, an EU source said.
($1 = 0.9983 euros)
(Reporting by Huw Jones; Editing by David Holmes)
By Huw Jones