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Last year, the EU pushed forwards on payment services reforms, the digital euro and instant payments regulation. Now, industry stakeholders believe that 2024 will be another non-stop year for payments players.
2023 was undoubtedly a stellar year for payments policy. The Instant Payments Regulation (IPR) was wrapped up in November and fintech lobbyists were successful in getting changes to the EU’s Settlement Finality Directive (SFD) included.
The European Commission also unveiled a raft of new proposals. These included the revised Payment Services Directive (PSD3), the first Payment Services Regulation (PSR), the Financial Data Access (FIDA) legislation and the Single Currency Package, which covers the digital euro and access to cash.
By the end of the year, legislators in the European Parliament at least had begun work on these legislative files.
"A lot of the work and achievements of 2023 will carry over into 2024,” said Andrei Cazacu, EU policy lead at TrueLayer.
"For instant payments, 2024 is a big year for implementation” he said. “The Instant Payments Regulation being signed off was a highlight of 2023, now the real work starts.”
Meanwhile, with PSD3 and the PSR, Cazacu predicted that things will be a bit slower, but said that the file could go into trilogues in early 2025.
“The year 2023 was a pivotal moment for the payments industry,” said Emőke Péter, head of public and regulatory affairs at Worldline.
“Reaching a political agreement on instant payments and the amendment of the SFD were crucial strategic priority themes,” she said.
Although Péter believes that significant progress was made in passing the necessary legislation, she warned that it is important to remember that establishing a level playing field in payments is an ongoing process.
“We must continue to work towards this goal in 2024, also via PSD3 and PSR.”
Magali Van Bulck, head of EMEA policy at Wise, agreed, saying that the company was “very happy about the passing of the IPR”.
“Everything that is in it, but especially the Settlement Finality Directive amendment, paving the way for direct access to payment systems,” she said. “It seems to always be the shorter regulations that deliver.”
Big changes will challenge firms
Although the IPR is a welcome initiative for many operating in the fintech space, some have warned that the changes that payment service providers (PSPs) will need to implement will be challenging.
“This is great news for European consumers and businesses but the technical implementation within a very ambitious timeline is set to be an enormous challenge for banks,” said Kjeld Herreman, head of strategy advisory at RedCompass Labs.
According to Herreman, there are a lot of issues to be tackled, such as changing legacy, batch-based systems to support a 24/7 market that requires a high number of transactions at low latency.
“That said, in 2024, we can expect the drive towards instant payments to pick up pace,” he said. “As there is no cookie-cutter solution that will work for all banks, we can expect to see them explore alternative approaches which don’t require them to change their core banking systems.”
Strengthening the PSR and PSD3
In 2024, Van Bulck said that some work will focus on improving the PSR and the PSD3.
“For example, the currency conversion proposals could be a fantastic step forward in banning hidden fees, but they could be challenging to implement,” she said.
Van Bulck explained that, on the surface, central bank-issued rates are an easy benchmark to point to. “But, as soon as you break this down, it stops making sense, especially in a time when we're moving towards instant payments.
“Comparing against stale central bank rates that are only updated once every 24 hours on business days isn't the best indicator of how high a markup actually is,” she cautioned.
Cazacu, meanwhile, pointed out that within the PSR, a “big highlight” is its focus on open banking. “This is a great opportunity to address some of the current shortcomings in PSD2 and help drive adoption of account-to-account payments."
In parallel to regulation, he also noted that there is now the SPAA scheme, which was launched by the European Payments Council.
This scheme introduces a market-driven framework for A2A payments based on open banking. “As of November 2023, we have a rulebook and a commercial model ready to go, and in 2024 the focus will be on signing up banks and PSPs, implementation, and pilots.
“There is stuff to iron out and this won't happen overnight. But it is all moving in the right direction, and builds on things that made 2023 a good year."
Will the EPI take off?
Beyond legislation, and the SPAA scheme, there is also the European Payments Initiative (EPI), which has already begun its pilots.
Evgeniy Ivantsov, chief marketing officer at FYST payments consultancy, predicts that this could mean that Europe becomes an even more cashless region for payments.
“The EU’s move towards a cashless society and cross-border payments are trends businesses should look to take advantage of,” he said. “With e-wallets having already gathered significant traction elsewhere globally, particularly in China and Southeast Asia, they are now set to become just as popular in Europe, with the EPI launch.”
This year, Ivantsov said, it will be interesting to see if Europe can reduce its reliance on financial technology from global superpowers, such as the US, through initiatives such as the EPI.
“If it can, I believe we’ll see Europe make moves to become a new tech superpower within the payments space,” he predicted.
