The European Commission will present this autumn a strategy on an integrated EU payments market, to facilitate the use of national payment services across Europe and reduce the dependency from international card operators such as Visa or Mastercard.
The Single Euro Payments Area (SEPA) provides for uniform credit transfers and direct debits for over 500 citizens in the EU.
However, a SEPA for cards is still far from a reality, as national card schemes and banks still don’t see the business case of overcoming connectivity and interoperability barriers and setting common standards.
The fast-changing realm of instant payments, disrupted by new technology companies, however, may offer an opportunity to achieve a single space for European cards sooner, said the ECB, which ultimately would benefit cardholders and merchants.
Against this backdrop, in the autumn the Commission is expected to present in autumn a strategy aimed at creating an “innovative, integrated and competitive retail payments sector in Europe, to compete with global companies,” an EU official told EURACTIV.com on condition of anonymity.
The EU executive will also table a new Digital Finance Strategy, according to the Commission’s work programme.
In order to pave the way for the legislation, a public consultation on payments will soon be launched, the Commission said.
The EU official explained that, due to the fragmentation among national card schemes, even the strongest European operators offer services that only work within individual member states.
As a result, “they have to team up with larger international operators that are not European if they want to offer pan-European payments,” the official added.
The intention to reduce the dependency from global players, such as Visa or Mastercard, is aligned with the EU’s new overarching goal of fostering European sovereignty.
The European Central Bank has already outlined the way forward. Its TARGET Instant Payment Scheme (TIPS), launched in November 2018, could create the necessary ‘momentum’ to break the national silos, the central bank said.
The Frankfurt-based institution said that TIPS “could be a way to support the interlinking and interoperability of national card schemes and, if full pan-European coverage is ensured, would provide a possible alternative to establishing a European card scheme,” according to a report published last April.
The ECB mooted the idea of using a common European logo to signal the acceptance of the new EU’s pan-European card.
The creation of a pan-European card would be the latest in the fast-changing payment field.
The second payment services directive was ‘a game-changer’ that opened up this sector, according to EU officials, banks and financial sector startups.
As banks were forced by EU legislation to share their customers’ data with new startups and financial service providers, the payment market opened up for newcomers, offering new services and cheaper prices.
But EU officials say that he increasing role played by ‘Big Tech’ and the consumer expectations are leading changes in the payment ecosystem. as well as lawmakers and eurocrats.
The latest bombshell was Facebook’s announcement that it would launch its own digital currency this year, a “serious” concern for G7 countries.
Still, the ECB said that Libra was a “wake-up” call for central banks, as Facebook’s stablecoin offered an innovative and cheaper payment option for users.
Six central banks, including the ECB, and the Bank for International Settlements are assessing the potential cross-border use of such digital currencies.
“In particular, we want to assess whether a central bank digital currency could serve a clear purpose for the public and support the ECB’s objectives” said ECB president, Christine Lagarde, in an interview last month.
Faced with the cost-cutting benefits offered by the newcomers, incumbents stressed the added value they provide.
Credit cards, still the most used electronic payment, accounting for around 52% of all non-cash transactions in the EU, highlight their perceived advantages among consumers in terms of convenience, speed, safety and security.
As the payments market becomes more saturated, the ECB stressed in its report last April that “deeper cooperation and dialogue among relevant market players, in particular incumbents and newcomers, is highly supported.”
The ECB wants the increasing competition to turn into cooperation, so a genuine Single Euro Payments Area could see one day the light of day.
(Edited by Benjamin Fox)