Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the Joint Conference of the ECB and the National Bank of Belgium on “Crossing the chasm to the retail payments of tomorrow”
This conference is the sixth in the series of retail payments conferences organised by the ECB in cooperation with a national central bank. These conferences have proven to be an excellent platform for bringing together market participants, policymakers, regulators and academics to share experiences, research and policy analysis.
This conference aims at focusing the strategic debate on the possible disruptions facing the retail payments space, and their potential impact, in the context of the more incremental transformation that is under way. The objective is to improve authorities’, academics’ and practitioners’ understanding of this phenomenon, as well as to identify possible future developments and dynamics that will ensure an innovative, integrated and competitive retail payments landscape in Europe, taking into account the global perspective.
According to Benoît Cœuré, Europe has made important progress towards a true banking union in recent years and we are improving our financial structures to support a single market of half a billion consumers, underpin the stability of our single currency and channel savings towards financing sustainable growth.
However, one area that has received less attention from policymakers in recent years, is the European retail payments market, in particular point-of-sale and online payments. Although a lot has been achieved at the back-end of European retail payments systems, most notably under the umbrella of the Single Euro Payments Area, or SEPA. SEPA allows payments to be processed across borders at the same cost, and as efficiently and safely, as national payments.
More recently, the Eurosystem has also introduced TARGET Instant Payment Settlement, or TIPS. This service, which was launched a year ago, enables payment service providers to transfer funds to their customers in real time, around the clock, every single day of the year. And it settles the payments in central bank money.
But progress at the back-end has not translated into similar progress at the front-end, which remains fragmented, with no European solution emerging for point-of-sale and online payments.
National providers in particular have not been able, or willing, to act in a pan-European manner. 20 years after the introduction of the single currency, we still do not have a European card scheme. Ten European countries currently have national card schemes that do not accept cards from other EU countries.
This has led to a notable rise in the use of non-European cards for non-cash payments. In addition, the current situation has attracted new initiatives that aim to overcome shortcomings in cross-border retail payments by building a new separate payments ecosystem.
No doubt, global payments markets are undergoing a transformation. Rapid technological progress, regulatory reforms and rising cross-industry initiatives, in particular by large global digital firms, have led to unprecedented dynamics and are putting established banks and payment service providers under considerable pressure.
In this environment, there are clear signs that Europe is at risk of losing its economic edge. Country-specific solutions lack the necessary size and scale, and national fragmentation has paralysed competition and stifled innovation on the pan-European level. In the worst case scenario, this may endanger the autonomy of European payment systems.
The vision of an industry-led, pan-European retail payment solution is therefore at the heart of the Eurosystem’s retail payment strategy. A pan-European strategy that facilitates instant, secure and inexpensive payments – both online and in brick and mortar stores – has the potential to make up lost ground and meet the rising needs of consumers for efficient cross-border payments. Better affordability, quality and choice will also promote financial inclusion.
Earlier this month the ECB’s Governing Council decided to relaunch its retail payments strategy. The aim of our strategy is to inter alia actively foster pan-European market initiatives for retail payments at the location of the purchase or interaction – so-called point-of-interaction, or POI, payments.
In the view of the Governing Council, these market initiatives would have to fulfill five key objectives.
These five key objectives form the heart of the Eurosystem’s retail payments strategy. They provide a conceptual vision that should be fleshed out by the private sector.
The Eurosystem therefore welcomes the strategic initiative of a number of major European banks to create a true pan-European retail payment solution. The proposed solution would be based on the SEPA credit transfer instant (SCT Inst) scheme. And it could capitalise from day one on existing infrastructures, such as the Eurosystem’s TIPS.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now