Sending and receiving cross-border payments is sometimes a complex process due to various factors, such as legal issues, and fees and commissions, among others. Account-to-account (A2A) payments, particularly immediate SEPA credit transfers, solve several variables related to cross-border payments between European countries. Firstly, they address the lack of immediacy of transactions. Immediate credit transfers allow money to be available in the beneficiary’s account, regardless of the country they are in, within seconds, and at any time of the day – an advantage for both corporates and individuals.
Secondly, SEPA instant credit transfers solve the problem of market fragmentation. They are a common payment channel for all European countries, for which all banks must be prepared (as stipulated in the latest rules on instant credit transfers approved by the European Commission in recent months). This expands the possibilities to create new business models on top of services based on these types of transfers to merchants (which tend to involve lower costs than other alternative payment methods). Financial institutions (FIs) and payment solutions leveraging this instrument are also given easier access to markets outside their borders. Bizum is the first payment solution in Europe to offer immediate SEPA credit transfer to support all its use cases, based on our added value as a service, namely using a mobile number as the only data required for any transaction.
Interoperability between European champions in their respective countries is crucial to creating an efficient and unified European payments ecosystem. We consider interoperability the most efficient and reasonable way to connect a European payment ecosystem that has leading solutions in its markets, a consolidated position and activity in recent years (in addition to Bizum in Spain, MB WAY in Portugal, BANCOMAT Pay in Italy, or BLIK in Poland, among others), and that addresses the needs of all its users, from individuals to large merchants. For ecommerce players, implementing interoperable payment methods such as Bizum means reducing friction in the cross-border payment process, and improving the conversion rate by accepting payments from the different solutions preferred by users in each country with less development effort. Furthermore, customers have an increasingly convenient and simple payment experience – they use their mobile phone numbers. This also facilitates financial inclusion for groups at risk of lagging behind the increasingly digitised landscape.
A2A payments, particularly immediate SEPA transactions, offer significant benefits in a cross-border context. Some examples are reduced transaction costs and faster processing times that enable better cash management for corporates, especially first merchants. In addition, immediate credit transfers bring additional benefits to users, such as confirmation of payee, which allows the recipient’s name to be checked before a money transfer or purchase is made. This assures the payer that the transfer is issued to the correct person. Needless to say, A2A payments help reduce the dependency on non-European companies to provide cross-border payments at the point of interaction, as almost every cross-border transaction at the POI in Europe today depends on a non-European network.
Bizum has worked closely with the European Central Bank (ECB) in the initial process of the digital euro development. A high level of engagement with the private market will help avoid certain risks that would otherwise lead to implementing a digital euro misaligned with the reality of the European payments market. To explore the possible impacts of the digital euro on the payment sector, in 2022, the country’s FIs and payment infrastructures took part in a proof of concept. This sought to assess the technical, business, and user experience impact of distributing the digital euro into current payment circuits. Our conclusions were shared with the Eurosystem’s working groups.
Based on these, along with the information published by the ECB on implementing a digital euro, we consider it necessary to leverage existing infrastructures such as immediate SEPA credit transfers – which were made mandatory for all FIs by recent European regulation – or the information directories that have millions of users in the active European payment solutions. The distribution of the digital euro should be based on payment solutions that customers already know and trust (such as Bizum), or else user adoption could be penalised or lead to digital exclusion.
In addition, we consider two aspects as key to the success of the digital euro. Firstly, the implementation effort should be minimal for all those involved, providing the digital euro with a competitive and reasonable compensation model based on the value contribution of each party. This would help keep the interest in its extension and ultimately ensure adoption by society is not put at risk. Similarly, it should be guaranteed that the legislative proposal defined by the European institutions to accommodate this new form of payment aligns with the requirements and obligations applicable to other means of payment.
The adoption of instant A2A payments is growing steadily. Bizum expects to end 2024 with 28 million users (more than half of the Spanish population), 85,000 merchants, and one billion transactions. Implementing immediate SEPA transfers is a trend already noted and promoted by the ECB, which estimates that, by 2030, 60% of ecommerce purchases and 20% of in-person purchases will be made through instant transfers. This is a reality in Spain, where instant transfers accounted for over half of all transfers (53.6%) in 2023, while in the euro area, the percentage was only 15.5%. This is largely attributed to the popularisation of Bizum as an everyday payment method for users, who made 30 bizums per second in 2023. The entry into force of the Immediate Payments Regulation will undoubtedly contribute to the increased adoption of this new means of payment.
This editorial piece was first published in The Paypers' Unlocking the Potential of A2A Payments Report 2024 – Changing the Way We Pay and Get Paid, which taps into the fast, ever-expanding A2A payments industry, being the ultimate source of information for businesses looking to grow their consumer base.
Fernando Rodríguez is Business Development Manager at Bizum and a Member of the Digital Euro Market Advisory Group, advising the Eurosystem on designing and distributing a potential digital Euro. Before Bizum, he was a strategy consultant at Accenture Strategy and previously worked at BBVA and Opinno. He graduated in Industrial Engineering at the Universidad Politécnica de Madrid (UPM) and Spanish Language and Literature at the UNED. He has a Master’s in Industrial Technology from the Illinois Institute of Technology (IIT) and a PMD from ESADE.
With more than 26 million users and an average of 30 bizums per second in 2023, Bizum is a success story in the banking sector: a joint project of Spanish banks’ collaborative and digital innovation initiatives. With its payment services, based on immediate SEPA transfers and digital identification via mobile phone, Bizum extends banks’ services to their customers conveniently, quickly, and securely. The banking brands offering Bizum represent a market share of over 99% in Spain, and Bizum continues to work on incorporating new users and use cases.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now