Exclusive interview with Martina Weimert, CEO of the EPI Interim Company

European Payments Initiative (EPI) is an initiative launched by 31 European banks/credit institutions and two third-party acquirers to create a unified, innovative pan-European payment solution leveraging Instant Payments SEPA Instant Credit Transfer (SCT Inst) and cards. EPI will offer both a card and a digital wallet to consumers and merchants across Europe.

The solution aims to become a new standard in payments for European consumers and merchants across all types of retail transactions including in-store, online, cash withdrawal and P2P.

For the time being, 31 European banks/credit institutions are involved spanning across 7 European countries together with two pan-European third-party acquirers.

What is the relationship with other initiatives that are aimed at designing common infrastructures (such as P27, a joint initiative by leading banks in Sweden, Denmark, and Finland, in collaboration with Mastercard)? 

EPI is not infrastructure only. It is a scheme and a solution. We`re building a platform that will be able to handle domestic, but also cross-border transactions, and we are developing a front-end solution for retail payments.

As far as I see it, P27 is focusing on the Nordics while we are trying to reach out to the whole of Europe - that's the scope we are aiming for.

We don`t have the same objective or ambitions as P27. As per the European regulator`s request, we are trying to build something based on a new technical standard for European payments.

And yes, we do hope to cooperate with P27. We are in dialogue with them. Overall, we aim for the same goal, to create synergies in Europe. However, our modus operandi differs. 

Does EPI mean the end of domestic card schemes?  

It doesn`t mean the end of the domestic card schemes. It means the migration of the domestic card volumes into EPI. Maintaining these domestic card schemes doesn't make sense. And therefore, to be more efficient in the future, we aim to bring these initiatives together.  We`re not doing a merger, but a transfer of domestic transactions into EPI, which ultimately could result in de-commissioning domestic card schemes. But this is a choice of each national banking community and not of EPI.

The idea is to maintain the assets of these domestic cards in the sense that they have a lot of clients and have been hugely successful in the past, even though their potential in front of the new market environment is rather reduced. We wish to migrate these assets into EPI. However, this migration will be based on a new platform with broader solutions because the domestic card schemes are limited, they don’t come with instant payment solutions. EPI, on the other hand, is both a card, an instant payments scheme and a wallet.

EPI is looking to migrate clients, volumes, - not the infrastructure and the rails.

The idea is to become  more efficient and share the future investments, to pool the volumes, bring them all together, all to one solution, one platform - to benefit from these synergies and get away from these fragmented, limited solutions.

Naturally, it will be a lengthy process, not one with a speedy timeframe. However, considering Europe’s volumes and this attractive opportunity to create an instant payment solution for Europe and the innovation potential we have in Europe, this long-term investment is worthwhile.

What are the main challenges in getting these schemes on board? 

The challenges are related to the migration process, the financial aspect, becoming cost-efficient. Right now, all these national card schemes are amortized. There are no major investments ongoing, most of them are maintenance and regulatory investments. 

Moreover, it`s the alignment challenge, as in Europe, we still have some specificities in the various markets.

So which solution do we design for whole Europe? We see different use cases, different ways of functioning emerging. That's why we think it's essential to cover cards and instant payment, NFC and QR codes and all kinds of retail use cases that we see developing in Europe. We aim to offer this flexibility for the European market, as Europeans have their specificities, which makes it attractive because it leaves the choice to the consumer and the merchants. Particularly, merchants ask for a better solution instead of local and fragmented alternatives; international merchants – pan-European or cross-border – have a big stake in the matter.

If you look in relative terms, some domestic solutions are far more successful than any international solution like for example Swish, iDEAL, Bizum and Blik. They have an uptake that is much stronger than any of these international solutions, but they are limited to a domestic environment. We must cover the use cases these solutions propose and integrate additional use cases and services because we need to keep up with innovation’s high pace.

Right now, we focus on the value proposition, the creation of standards, the development of specifications and certifications, the technological base, the governance of the project, the branding and the establishment of the acceptance network for EPI. These efforts involve heavy investments. Thus, financial support is an important element. To compete, you need quite a lot of innovation funding. In this sense, we foresee an important innovation budget, something which none of the national solutions can cater for, something that gives EPI the upper hand over domestic solutions.

Is there a plan for co-badging (local schemes, EPI, American schemes) to drive competition?

In terms of co-badging, we could go for co-badging agreements with Visa and Mastercard, mainly for international acceptance. The co-badging will be up to the decision of each bank, each issuer. 

What`s the value proposition and what are the benefits for merchants? Specifically, in terms of cost (the rise in merchant services fees in the past years/the increase in credit and debit card processing costs), conversion, and reach.

Through this initiative and the bundling that we're doing, we can come up, first of all, with a cost-efficient solution. Of course, we have to have an initial investment, which is quite high, but there is an opportunity to leverage these common volumes. 

EPI allows, for the first time, the European merchants to have cards and a broad, instant payment solution under one brand, to not depend anymore just on cards. They will have two payment means at their disposal and they will have the choice. If tomorrow, for example, they want to accept purchases with higher amounts, or if they want to receive the money immediately on their account, they can leverage this new solution. 

A payment solution that works for all use cases, choice of payment means to be accepted, lower costs and an easy integration are the benefits for merchants. 

What are the benefits for consumers?

It`s all about convenience, choice, and security.

EPI wishes to address a wide range of payment use cases by following the evolution of uses in Europe. We aim to have everything in one app, instead of having fragmented solutions per use case. The idea is to address point-of-sale payment, ecommerce, cash withdrawals and P2P, and value-added services such as digital identity or instant financing. 

It`s a very broad scope, which makes it attractive because, as a consumer, I will have my bank account linked to it. I have full transparency; I can see my transaction history and I can also choose the payment means I would like to use.

You will have two payments means and not just one. For instance, if you hit the limit of your card, you will have the option to go for instant payment which is broader in terms of limits.

Furthermore, if tomorrow you want to hire a bike, you flash the corresponding QR code, and it's immediately debited. So we are able to cover new payment situations of unattended commerce and you don't need to have other payment solution to do so. 

And, in addition, the consumers can get services from their bank, like Buy Now-Pay Later, which will be immediately available from their bank. They don`t have to register again with details or go through a scoring process. It will be available on the spot.

We should also underline that the solution will contain currency conversion throughout the whole of Europe. The first country where we will implement this is Poland. 

Why would a bank join this initiative? What are the benefits for issuers and are there any incentives for them to join (considering the cost of investments, branding, potentially having to build a new scheme on top of an existing domestic scheme)?

To be cost-effective, it will be better for banks to share the investments instead of sponsoring local solutions themselves.

Many have tried to invest in wallet solutions in the past, for example. However, no European bank is big enough anymore to compete in this area. 

The solution will be available through mobile banking integration, but also as a standalone app. The vast majority says that they want to go through a mobile banking app, so they will find EPI in their banking app. On the other side, we will also make it available as a standalone app since there’s also a group of consumers that prefers to have a separate app only for their payments.

Nowadays, it`s convenient for the bank to have a full-fledged payment wallet solution available, which is easy to integrate into their environment, and not having to develop it themselves. 

So, it's sharing the investment, sharing the development and acceptance rollout. What`s more, by working together, the banks have learned (and will continue to do so) a lot from each other; for example, we have witnessed the success of different initiatives: iDEAL is a huge ecommerce success, Bizum is a huge P2P success, the German savings banks have just managed to integrate Girocard with ApplePay. We are trying to leverage these learning points for EPI.

How does EPI take into account fundamental cultural differences (eg domestic schemes possibly becoming part of the pan-EU payment initiative and local rules and constraints) which need to be addressed for the initiative to work on a pan-European level? 

We did a lot of benchmarking around different players in the market (among domestic solutions but also international players) to define the best way a leading-edge new solution can function. 

As a key takeaway, convenience is super important for the users. 

Of course, people are used to a certain functioning in their home markets, and to certain products. Nevertheless, with all the usage that we see developing in digital payments a certain standard or best way of functioning is clearly emerging and it becomes now rather clear what works and what doesn't. So, we have tried to integrate these insights into EPI. 

In terms of cultural differences, we manage them by aligning EPI to cutting-edge solutions as, ultimately, everybody will want to have this convenience that we aim for.

The solution caters for a broad scope covering NFC, but also QR codes and will be able to propose many services. We`ll also go for biometrics since it has become an international standard.

We try to respect specific needs. However, we have to see also that Europeans, even though they all come with different backgrounds, in the end, they are all digital users who develop the same behaviour or patterns as elsewhere. So, it's a mixture of European specific things versus patterns we see developing internationally.

We developed EPI through benchmarking, consumer research, testing on leveraging all the findings we have from the national, but also international solutions. We started with a rather traditional approach, trying to find out what does and doesn't work for domestic or international players, and then adapting it to the requirements of the European market.

You don’t want to lose the convenience you have today, but on the other hand, you want to offer new things, new solutions. 

The key takeaway that we consistently saw in each market is that people are very keen to get a wallet. They appreciate a lot that there are numerous choices and that it is offered through their bank, as EPI will not have direct client relationships. The clients will be in a direct relationship with their bank. EPI is a channel for banks. 

Do you see major discrepancies in different markets? Are some more eager to get on board than others? 

Obviously, the markets that are already on board are the most interested ones. For the others, there is certainly a general tendency to say let's wait and see first, if EPI is successful in those markets. 

It`s human nature, before going for a major change or journey, to wait for others to succeed.  It's easier to be a follower than a leader. On the other side, by doing so, those who wait will not have the possibility to influence the solution and it should be underlined that early adopters will have several advantages. 

Also, for the smaller countries, particularly, it might be difficult to imagine what would be their role in EPI. However, we have now a consortium of 12 smaller Spanish banks on board. As a consortium, they share the investment, the decision-making power so that it becomes feasible for them to get on board and be adequately represented.

We are now talking to smaller European markets, so that they can also join and be fully part of the governance and the setup. 

Do you have an internal timeline to onboard other markets? How is it going to play out in practice?

Right now, we already have critical mass, meaning we have 65% of the European market in the initiative.

That doesn`t mean at all that the ambition of the EPI is to stay just in these seven markets. EPI is open for European market players, individual banks or banking communities, as well as payment service providers, to apply and join EPI.

The next big step for us is the decision-making to convert into EPI Target Holding Company, this autumn, which will be a very important step and represents the commitment to the market launch. 

By then, we will also be able to welcome more countries. Right now, some countries are studying the proposal and considering joining.  

It`s also very important to understand that not everybody has to become a shareholder; you can also just become a member, meaning having the possibility to connect to EPI with your market and using it for your clients without becoming a shareholder. 

About Martina Weimert