Europe is ripe for instant payments, money stays king

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Agnostic is a word that the Director General of the European Payments Council (EPC), Etienne Goosse, often uses to describe the mandate of the payment association which has 2,343 payment service providers, representing around 59% of all providers. payment services (PSP) of the EU as members.

This is also why it rejects repeated calls to regulate compliance with SEPA Instant Credit Transfer (SCT Inst), he told Karen Webster in an interview. SCT Inst is one of four separate payment systems managed by the EPC, the one that allows payments up to 100,000 euros (approximately $ 117,600) to be made 24/7 and received in a few seconds.

See also: EU banking trade group insists on instant payments

“[SCT Inst] is an investment that is not trivial, and for some niche players there is no business case and there will likely never be a business case, ”he said.

This is partly because other payment systems work very well for consumers and merchants, including direct debits that EPC also manages, and cards which currently account for 41% of transactions in the EU.

And where cash accounts for a surprisingly 78% of all point-of-sale (POS) transactions in the age of digital payments and mobile wallets and almost half (48%) of the value of those transactions, according to published data by the European Union. Central bank in 2020.

Read more: Study on consumer payment attitudes in the euro area (SPACE)

In countries such as Germany, Spain and Italy, cash remains a popular instrument for in-person retail payments, pointing to the dual challenge of orienting consumers to digital payments anywhere. point-of-sale nature, while cash is also a form of instant payment that consumers trust and use, especially when paying other people.

Money is still king in Europe

Goosse agrees, pointing to more recent statistics that show ATM usage is declining as consumers move away from cash for health reasons, but is also accumulating it due to uncertainty of the pandemic and the tangible store of value that cash represents.

In some countries, Goosse said, consumers aren’t interested in instant payments unless they need to make payment urgently and digital rails are more accessible and convenient. With greater value also comes the potential for instant monetization by these banks and PSPs.

He acknowledged that banks have implemented SCT Inst differently depending on whether to monetize instant payments.

See also: European Payments Council calls for help in tracking down fraud

Goose said that since SCT Inst requires both technology (from the lot right now) and process change for banks and their business customers, not everyone can or will want to invest to support it unless and until it is proven that more consumers will adopt it and want to use it. Currently, Goosse said that almost 10% of EU transactions are done on SCT Inst rails.

Beyond the ivory tower

Goosse said that in the past the EPC had been accused of operating in “an ivory tower”, directing how payments should be made. But “like the war, it is important that it be left to the generals”, this is what the association did to carry out its mandate.

“[The EPC] does things that we believe have market value and bring value to gamers and end users, but they choose, banks choose and PSPs choose, ”he said.

Goosse pointed out that the EPC does not intend to pit two instruments against each other – direct debit and SCT Inst – because “that is not our role; it’s up to the market to decide what they use.

Getting more merchants to see the need for a centralized instant payment solution can help move closer to the goal, and involving these small businesses from the start in the entire process will be essential. It was also there that he said that the EPC and the European Payments Initiative (EPI) can learn lessons from open banking regulation, compliance with which has been repeatedly postponed, until March 2022.

Banks had to develop basic PSD2 features without being paid, so they need a business case beyond PSD2, Goosse said. And with pay on the table, the development of a harmonized schema for functionality requirements beyond PSD2 is within reach.

“This is why it is in the interests of third party payment service providers (TPP) and traditional PSP banks to come to an agreement, which was not the case for PSD2,” he said. .

The EPC has also been active in the fight against fraud, after seeing an increase in payment fraud and scams. In April, it issued a call for tenders to find a “reliable independent service provider” to contract out the maintenance and management of a new malware information sharing system (MISP ) for SEPA. The MISP is expected to go live by February 2022 after three months of pilot testing.

Do not take sides

Goosse said the EPC has an informal relationship with the EPI, an initiative launched by euro area banks to create a unified, European-wide payment system that can support card networks like Mastercard and Visa.

Some of the schemes created by the EPC, like the SCT Inst and SEPA Request-to-Pay (SRTP), might be of interest to the EPI, “but we are agnostic again,” he noted, adding that the ‘PPE is a solution like any other already using SCT Inst on the market.

“We don’t want to be seen from one side,” he said. “We are already universal; we have no preference towards anyone, only [toward] the market. We want to listen to the market and satisfy the market, but not one player in particular. “

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