Robrecht Vandormael of Payments Europe: ‘The Commission believes charges for both regular and instant credit transfers should be the same – although it notes that there will be additional costs for the provider if features and add-ons, such as chargebacks, are offered with instant payments’
It’s no news that the European payments landscape has undergone profound transformations over the past few years, which have been fuelled by new technology and regulation. On the policy side, the European Retail Payments Strategy has been the latest addition to a series of regulations in Brussels aiming to create a more diverse, competitive, and integrated market with accessible and low-cost payment methods. In its latest payments statistics, the European Central Bank (ECB) showed that the total number of non-cash payments in the euro area increased by 8.1% to 98.0 billion in 2019 compared with the previous year, suggesting that regulation has pushed the market in the right direction, with consumers and retailers having access to a wide array of electronic payments solutions.
In the age of digital solutions, however, the European payments market needs to be further integrated. The EU has made significant contributions in this direction with the European Retail Payments Strategy. In addition to preparing the review of PSD2, it has outlined a future vision for Europe and the necessary regulations that potentially need to come with it. Below we outline what the implizcations of the Retail Payments Strategy are for cross-border payments and what we believe this means for the future.
The Retail Payments Strategy and cross-border payments in Europe
In the Retail Payments Strategy, the European Commission has developed a vision for the EU’s retail payments. It aims to make it possible for citizens and businesses in Europe to benefit from a broad and diverse range of high-quality payment solutions supported by a competitive and innovative payments market. It is also looking to encourage the development of homegrown and pan-European payment solutions to support Europe’s financial sovereignty – and become less dependent on card payments and global card schemes. Finally, the Commission made significant contributions to improve cross-border payments with non-EU jurisdictions, including remittances.
A key cornerstone of Europe’s strategy is the further development of instant payments. The Commission is aiming for full uptake of instant payments via the SEPA Instant Credit Transfer (SCT Inst.) by the end of 2021. If this uptake goes too slow, the Commission will decide whether it is appropriate to propose legislation requiring payment service providers’ adherence to the SCT Inst. Scheme by the end of 2021.
Increasing consumers’ trust in instant payments
There is a clear drive to consider how consumer protection can be built into instant payments. The Commission believes charges for both regular and instant credit transfers should be the same – although it notes that there will be additional costs for the provider if features and add-ons, such as chargebacks, are offered with instant payments.
In the context of the Payment Services Directive (PSD2) review, the Commission will assess the extent to which the EU’s existing consumer protection measures (e.g. rights to refunds) can provide consumers making instant payments with the high level of protection offered by other payment instruments. The Commission will assess the impact of charges levied on consumers for instant payments and, if relevant, it will require that they are no higher than those levied for regular credit transfers.
A European card player
It is not a secret that the European Commission and the ECB have been a strong advocate of the creation of the European Payments Initiative (EPI), an initiative by several leading banks in a number of Eurozone countries, including Germany and France, to set up a European card scheme. While this is a market-led initiative, the Commission aims to ensure that the right regulatory framework exists.
The Commission will also continue to play an ‘active political role’ in driving pan-European payments. Later in its mandate, the Commission will explore the feasibility of developing a ‘label’ accompanied by a visible logo for eligible pan-European payment solutions – exploring ways to facilitate the deployment of European specifications for contactless card-based payments (CPACE) and supporting the modernisation and simplification of EU merchants’ payment acceptance facilities, enabling for example cash registers to issue e-receipts.
The review of PSD2
The review of PSD2 will have wide implications. Strong Customer Authentication (SCA) and contactless will definitely feature high on the list of priorities. The Commission has already committed to exploring whether additional measures should be considered to address new types of fraud, in particular with regard to instant payments. It will also re-examine the existing legal limits on contactless payments, with a view to striking a balance between convenience and fraud risks.
It also plans to assess, in the framework of the PSD2 review, whether the transparency of cross-border international transactions needs further improvements.
Where to go from there
The EU has set out an ambitious vision for developing an autonomous European payments market. When it comes to encouraging cross-border payments, the Retail Payments Strategy pushes for the development of European grown technologies, mainly based on instant payments to be developed across the single market. The Commission sees itself as the political catalyst, whilst relying on the private sector to ‘design’ the relevant payments solutions. The Commission has made it clear that it will not shy away from introducing further regulation to achieve this goal.
This editorial was first published in our Cross-Border Payments and Ecommerce Report 2020–2021, which assesses the change of pace that occurred in 2020 and provides a comprehensive overview of the major trends driving growth in this space, being the ultimate source of information for players interested in selling across borders.
About Robrecht Vandormael
Robrecht is Secretary General of Payments Europe. Together with the founding members, Robrecht set up and launched the association in 2019. He is responsible for setting the strategic direction, the day-to-day management, and the external representation of the association. Robrecht fulfils this role as Managing Director at FTI Consulting, a global business advisory firm. Robrecht has more than 10 years of experience in EU advocacy, communications, and coalition building, in particular in the field of financial services, fintech, and payments policy.
About Payments Europe
Payments Europe is an association of global and European card-based payment solutions providers created to strengthen the voice of the industry. Our mission is to promote a better understanding of the complexity of card payments and the inherent value it brings to society. We support a vibrant, innovative, and competitive European payments market, that is based on a balanced regulatory framework, putting consumers and consumer protection at the heart of everything. Payments Europe’s members are active throughout Europe representing card issuers, card acquirers, four-party card schemes, and other stakeholders active in the ecosystem that offer card-based payment solutions.
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