`EPI` stands for “European Payments Initiative”
EPI is an initiative backed by 16 European banks and financial services companies to create a unified, innovative pan-European payment solution leveraging Instant Payments SEPA Instant Credit Transfer (SCT Inst).
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, and peer-to-peer.
EPI company has recently confirmed its planned acquisition of payment solution iDEAL and payment solutions provider Payconiq International (PQI). How will the acquisition of iDEAL and PQI help it realise its vision for a strong European account-to-account wallet solution for Europe?
So far, we had France, Belgium, and Germany as launching markets, and with iDEAL we have the Netherlands on top. We view iDEAL as a ideal complement to reach critical mass in the establishment of a European payment solution which we are currently building, enabling us to extend our geographical reach even further. By capitalising on iDEAL's substantial size as the largest inter-banking solution in Europe, we can rapidly expand our operations and establish a strong initial footprint in the market.
iDEAL, with its impressive track record of facilitating 1.2 billion transactions annually, boasts a robust network of over 240,000 merchants operating not only in the Netherlands but also in other European countries. This strategic partnership provides us with the advantage of leveraging an existing acceptance network instead of starting from scratch.
We will gradually implement the entire roadmap. Initially, by the end of this year, we will begin with test transactions and peer-to-peer payments, followed by a full commercial launch. Moving forward, in the latter half of 2024, we aim to enter the realm of e- and m-commerce. However, the timing of this expansion will depend on the actual launch date and the integration speed of web merchants. Moreover, by 2025, we have plans to introduce in-store payments.
Additionally, once our peer-to-peer system is live, we will introduce P2Pro, which enables payments for professional services. This is designed for individuals who do not possess currently a terminal or prefer not to have one, yet still wish to accept digital payments. This feature can benefit professionals in the early stages of their activities, such as fitness coaches, babysitters, gardeners, and others.
Secondly, when our ecommerce platform launches, we will introduce m-commerce. This feature allows you to get a QR code while, for instance, on the street or inside a shop, eliminating the need to use acash register. By simply finalising the transaction in your app, you can make payments seamlessly. For instance, imagine coming across a pair of sneakers in an ad with a QR code. You can simply scan the code, complete the transaction in your app, and receive the sneakers. Similarly, renting a bike is easy as you scan the QR code and finalise the transaction. Our m-commerce solution enables you to conduct transactions through your mobile phone without relying on a cash register or a card terminal.
This development is significant and currently absent in Europe. It`s worth noting that thus far it cannot be achieved through NFC technology. Therefore, we will focus on point-of-sale solutions using QR codes. While we would also like to incorporate NFC, there are restrictions in the iOS environment. Our goal is to provide QR codes and, when possible, NFC options to offer choices in the future. NFC proves to be an excellent solution in certain situations, while QR codes offer new opportunities and convenience in others.
This use case is appealing as it caters to the omnichannel needs of merchants and encompasses various scenarios. Furthermore, we will provide a range of value-added services, including the integration of merchant loyalty programs once we will enter into the POS environment. This means you can earn and redeem loyalty points seamlessly within the same app while making transactions, eliminating the need for separate programs or apps. It is all integrated.
Moreover, EPI will have the capability to integrate future services such as instant financing through your bank, the integration of the European digital ID (which is currently an ongoing important initiative led by the European Commission), and even the potential inclusion of the digital Euro. As EPI functions as a comprehensive wallet, it offers great flexibility for incorporating upcoming value-added services that will be defined in collaboration with merchants.
We are currently developing a new platform. However, it is important to note that we will not be using the iDEAL platform. Instead, we are working closely with them to ensure a seamless migration process for consumers . Our goal is to facilitate a smooth transition for merchants, eliminating the need for them to sign up again and avoiding the creation of a new payment button.
We have been engaged in thorough discussions with iDEAL for several months now to ensure the successful introduction of new services and advancements. We are also taking into account the current developments of iDEAL 2.0, which represents their ongoing modernisation efforts and is a great preparation for EPI.
The distinction between EPI and the SPAA lies in their approach. The access scheme primarily consists of a set of rules designed to enable access and interoperability within the market. It is a mechanism designed to establish a specific functioning within the market, ensuring interoperability and facilitating access to banks' environments, among other purposes. But it's not a solution in the sense that it doesn't come with a complete set-up, it doesn't come with services, and it's not a commercial undertaking.
EPI is an open scheme. It operates on a four-corner model, allowing entities to become members or shareholders.
Membership does not require shareholding, making it accessible to any account-holding entity. However, to participate, an account is necessary as EPI is built on instant payments. Participants must either be instant payment-ready or be an acceptance provider, or an acquirer, so that you can serve the merchant side of the whole setup. While specific requirements exist for shareholding, such as maintaining a European footprint, membership is open to entities as long as they have an account and are instant payment-ready.
EPI takes a different approach from EMPSA, focusing on a solution rather than interoperability. As a result, compatibility between EPI and EMPSA is unlikely. For iDEAL, I believe it will not be compatible with EMPSA in the future. EPI is focused on creating a singular solution and does not prioritise interoperability, making their objectives different.
For us, the interoperability setup in Europe falls short of satisfaction. When examining the participating countries, it becomes apparent that they do not collectively provide a solution that covers all of Europe. As a result, not everyone can participate in EMPSA without first establishing their own solution. Furthermore, these individual solutions cater to divergent use cases, with some focusing on P2P transactions, others on ecommerce, and some encompassing both. We believe that this fragmented approach will not lead to the development of a robust European solution.
As mentioned previously, EPMSA focuses on interoperability. We are creating a new solution by connecting national schemes, resulting in a unique and unified solution for the whole market. This means that there won't be separate solutions for each country, such as a French solution, a German solution, or a Dutch solution. Instead, it will be the same solution applied universally. We integrate the necessary services, considering also specific requirements in countries like the Netherlands, where certain services are important due to historical reasons. Thus, we have one solution versus the interconnection of existing national solutions.
Many European markets are currently in the early stages of integrating wallets into their standard economic practices for consumers. A wallet serves as a container that allows for the integration of various payment use cases, including peer-to-peer transactions, ecommerce, physical payments, commerce, and value-added services. By encompassing these diverse services within a single function, users can benefit from a consistent authentication process and a unified customer experience across different payment scenarios.
The wallet offers significant flexibility, ensuring its ongoing usefulness and providing consumers with an all-in-one solution. Currently, consumers rely on various payment methods such as mobile banking apps, payment cards, or platforms like PayPal or Apple Pay. However, none of the existing payment solutions in European markets cover all use cases, resulting in fragmented usage that may even require multiple accounts. With EPI, this inconvenience is eliminated as consumers can leverage all services from one account through a unified solution. The solution places great emphasis on empowering consumers with choice and control. Consequently, consumers can choose to use the solution for specific purposes, such as peer-to-peer transactions or ecommerce.
Moreover, the wallet facilitates seamless integration with multiple banks by offering a dedicated app where users can enroll different bank accounts. Overall, the wallet provides users with a highly flexible and comprehensive solution. Our main focus lies in offering consumers complete control and choice, ensuring a fully flexible experience while maintaining consistency to eliminate the need for multiple apps or accounts.
In addition to addressing existing use cases, such as peer-to-peer transactions and ecommerce, the EPI aims to introduce new functionalities that are currently either non-existent or underdeveloped in Europe, such as m-commerce or P2Pro payments.
Incentivising consumers to switch to EPI is a crucial consideration since they already have established payment methods and habits. While some consumers have embraced digital payment methods, others have not. We seek to persuade consumers through a superior customer experience, emphasising ease of use and the immediate visibility of all transactions within their account. There are no delays or separate transaction histories, ensuring full transparency and immediacy for consumers. This feature is particularly valued by consumers, as traditional cards often require separate accounts and statements. By providing consumers with complete control and immediate access to their budget and financial position, we hope that the ease and convenience of this new customer experience across all use cases will be convincing. We aim to gradually introduce EPI, recognising the need for consumers to become accustomed to the solution. Thus, we commence with P2P transactions, the easiest way for consumers to explore a new payment method. This approach also allows for smaller transactions, such as reimbursing a friend for a drink, and integrates engaging features like gifs and emojis. This gradual approach helps consumers build trust and confidence in the solution before expanding its use to commercial transactions involving larger amounts.
We firmly believe that the ease of use, convenience, and the additional value we provide will convince consumers to switch gradually. Additionally, we can rely on the support of banks, who will assist us in promoting the solution, as well as third-party acquirers on the merchant side.
Regarding the potential impact on banks' revenue compared to current card payments, it is important to consider the specific circumstances. However, there are several compelling incentives for banks to offer or join the European Payments Initiative (EPI).
Firstly, participating banks gain access to an innovative solution with extensive coverage. Instead of individually developing their own payment solutions, banks can take advantage of the comprehensive offering provided by EPI, which spans multiple European markets. By collaborating, banks can pool their investments in innovation, benefiting from greater financial resources collectively. This presents an appealing proposition for banks.
Furthermore, EPI aligns with the regulatory push for instant payments in Europe. By joining EPI, banks can leverage the capabilities of instant payments to strengthen their customer relationships. EPI offers a new and attractive payment option that provides customers with choice and control. This enhances the overall customer experience and allows banks to position themselves favourably in the evolving digital landscape.
In terms of business viability, EPI aims to offer competitive pricing to remain attractive to both banks and customers. The incentive for banks extends beyond current revenue streams, as EPI presents an opportunity to develop a new business model centred around instant payments. This enables banks to adapt and prepare for the future, recognising that digital interactions are likely to surpass traditional, physical, card-based and cash transactions.
The European Payments Initiative (EPI) has devised strategies to encourage banks and markets, including Italy, to join their initiative and expand the network of participating banks. While immediate expansion into other markets is not a requirement for EPI's continuation, it would be welcomed. EPI has already established a strong foundation with the involvement of four markets, representing over 60% of European transactions. The shareholders and members of EPI include acquirers and issuers, which further strengthens their position. Thus, EPI is not reliant on the addition of more markets to sustain its progress.
EPI aims to showcase the effectiveness of its product and successful track record in different markets to attract interest from other European markets. By demonstrating the results and approach of our solution, we aim to convince other markets to join the initiative. Although discussions are ongoing with other markets and there is significant interest since the announcement, EPI remains open to further expansion and will adapt to the demand as it arises.
Regarding future acquisitions, while it cannot be ruled out entirely, it is not currently a priority for EPI. The previous acquisitions were made to incorporate iDEAL into the initiative, which is a highly attractive proposition. This deal allows the Dutch banks to join EPI, collaborate and share resources with the other banks, exemplifying their trust in the overall approach. While the possibility of future acquisitions is not totally excluded, the primary focus for EPI at present is to deliver the solution to the market, leveraging the solid foundation we have already established.
Martina Weimert is the CEO of EPI Company, since the early days of the initiative established in December 2020. Martina has been supporting and guiding European banks and acquirers to build the foundation of the EPI Company, aiming to build an independent European solution and connecting Europe’s payment industry. With 20 years of experience in international consulting, she has in-depth experience in payments and payment solution set-up, fintech, blockchain, and retail banking in Europe, the Americas, and the Middle East. Prior to joining EPI, she was a partner in the Financial Services Practice of the consultancy Oliver Wyman in Paris, leading the European payments practice, previously holding the positions of Senior VP at Capgemini Consulting, and Marketing & Sales Director for Deutsche Bank in France. Martina graduated from the Institute of Political Science Paris in European business development and holds a Master degree in International Administration (DESS) from Sorbonne University, and studied before Political Science at the University of Bonn.
`EPI` stands for “European Payments Initiative”. EPI is an initiative launched by 16 European banks and financial services companies to create a unified, innovative pan-European payment solution leveraging Instant Payments SEPA Instant Credit Transfer (SCT Inst). 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, and “peer-to-peer”.
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