ECB to enable mobile payments using phone numbers by 2018

EU citizens will be able to make person-to-person payments by smartphone in 2018. [John Karakatsanis/Flickr]

ECB plans to link mobile phone numbers to their owners’ bank accounts will facilitate bank transfers and consolidate the eurozone payments market. EURACTIV’s partner La Tribune reports.

What if making a payment was as easy as making a phone call? What if you could pay a friend or a small business anywhere in the EU with just a smartphone and the beneficiary’s phone number? This should be possible as early as next year.

The European Central Bank (ECB) announced this plan, baptised Eurosystem, on Friday (6 January) at a conference organised by the Bank of France on technological innovation in payments.

“Aligned with the timeline for the implementation of the instant payment scheme, the Eurosystem expects the launch of a standardised look-up service that allows (person-to-person) mobile payments using the mobile phone number of the payee as a proxy for the IBAN [International Bank Account Number]. This service should be launched by the end of 2017 and should not be restricted to national IBANs,” said Yves Mersch, a member of the ECB’s executive board.

Mobile payments phonebook

According to a source close to the project, the idea is to form a kind of European directory for mobile payments. The mobile phone number entered would redirect payments to the bank account of the beneficiary’s choice.

Under the proposed system, person-to-person mobile payments would be possible, regardless of which European country the bank accounts are held in. This step forward will be particularly important for the sharing economy. For example, a European tourist or student letting a room to an individual would no longer be obliged to pay in cash or to go through a platform like Airbnb.

American payments behemoth PayPal has just launched a person-to-person money transfer service, using just a mobile phone number or email address, which is free for transactions in euros within the EEA.

The Californian company Square, whose card reader is specially adapted to the needs of small businesses and the self-employed, plans to launch in Europe later this year. Founded by Jack Dorsey (of Twitter), the company, valued at $5.3 billion on Wall Street, set up a subsidiary called Squareup Europe in the United Kingdom last summer and is now recruiting in Dublin.

Square has become the fourth-biggest traders’ network in the US for card company Visa, according to Bill Gajda, Visa’s director of innovation and strategic partnerships, who was also present at the conference.

Competitiveness and sovereignty at stake

So for Europe, this is a real question of competitiveness and sovereignty. At the same time, the ECB is wrried about the risk of the European market fragmenting into zones that use different, non-compatible mobile payment systems.

Eurosystem is asking payment service providers to establish instant payment solutions by November 2017. Today, payments within the IBAN area take one working day.

And to accelerate bank-to-bank transfers, the ECB also proposed to switch from the European payments platform Target2, used by central and commercial banks, to a real-time system. Completing transfers in around 25 seconds would mean banks would not need to immobilise capital to act as a guarantee.

A public consultation was launched on Monday (9 January).

“Europe must not fall behind countries like the United Kingdom, for example [which established an instant payments system in 2008]. With this integrated payments market, it will even be ahead of the United States,” said Mersch.

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