Banking Circle To Support Cross-Border Mobile Payments Between Austria, Germany And Switzerland

June 15, 2022
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Banking Circle, a payments bank headquartered in Luxembourg, has agreed to provide foreign exchange and settlement services to two European mobile payment providers, TWINT and Bluecode.

Banking Circle, a payments bank headquartered in Luxembourg, has agreed to provide foreign exchange (FX) and settlement services to two European mobile payment providers, TWINT and Bluecode.

Combining with German-Austrian Bluecode and Switzerland's TWINT, the deal will see Banking Circle act as a central hub for FX and settlements for transactions between the two systems.

Funds will be transferred via Banking Circle as the provider of a central settlement account, and transactions in different currencies will be automatically converted.

The three-piece partnership, which will support both peer-to-peer (P2P) and person-to-merchant (P2M) payments, adds another layer of interoperability between TWINT and Bluecode.

In January, TWINT and Bluecode became the first mobile payment systems in Europe to achieve cross-border interoperability based on European Mobile Payments System Association (EMPSM) specifications.

At first, the cross-border payment linkage was available only on a P2P basis for friends and family, but now with Banking Circle, the partnership can go one step further.

By making both mobile payment systems interoperable, the partnership will allow TWINT and Bluecode customers to use their preferred mobile payment app across the three countries.

For example, Bluecode customers can use their app at the point of sale (POS) when travelling in Switzerland and TWINT users when visiting Germany and Austria.

In a statement, Banking Circle said it has capitalised on its position as an independent bank with access to direct clearing and settlement in the Single Euro Payments Area (SEPA), and that the deal is a milestone in Europe’s mobile payments landscape.

“We’re genuinely fixing a problem that was holding back growth in the European mobile payments market with a solution that creates a better consumer experience and delivers a new revenue stream,” said CEO Anders la Cour.

“Being entirely cloud-based enabled us to quickly develop this innovative approach to the European mobile payment market when we were first approached by the mobile payment providers.”

La Cour added that Banking Circle plans to connect more domestic P2M payment systems over the coming months. “It could well turn into a game-changer for the mobile payments sector,” he said.

Christian Pirkner, chairman of the EMPSA, said that TWINT and Bluecode have set an example that other P2M providers are likely to follow.

“It is absolutely great that TWINT and Bluecode have built interoperability based on EMPSA specifications,” he said.

“Them choosing Banking Circle for foreign exchange and settlement services ensures a highly scalable setup for the Alpine Corridor of EMPSA.”

Nordic merger for cross-border mobile payments

More cross-border mobile payment linkages are also expected to be delivered in other parts of Europe, following a highly anticipated merger that was announced in June last year.

Denmark’s MobilePay, which is owned by Danske Bank, announced plans to merge with Norway's Vipps and Finland’s Pivo, creating the prospect of a pan-Nordic mobile payments wallet.

Vipps is owned by a Norwegian banking consortium, and Pivo is owned by OP Financial Group, Finland’s largest bank.

If the deal is approved, the new company would serve more than 11m users and 330,000 shops and online stores, making it one of the largest bank-owned mobile payment providers in Europe.

Under the merger, MobilePay said it plans to strengthen product development and innovation for both personal and business customers, and plans to invest heavily in cross-border e-commerce payments.

Mark Wraa-Hansen, head of personal customers for Denmark at Danske Bank and chairman of MobilePay, said the deal will help the three providers to become more competitive internationally.

“At Danske Bank, we are proud to have developed MobilePay, which is providing free, user-friendly and innovative solutions to our users and easy, seamless payment solutions to businesses,” he said.

“However, it is very expensive to compete with global competitors in this space, and in order to continue to develop the most attractive solutions for our customers, MobilePay must be part of something bigger to gain scale and pool investments for further innovation.”

The merger is conditional on approval by the relevant authorities, including the European Commission, and despite expectations that final approval would happen in the second half of 2021 or in early 2022, no announcement has yet been made.

An alternative to EPI?

Given the recent challenges faced by the European Payment Initiative (EPI), these two announcements highlight that it is possible to offer cross-border, multi-currency European mobile payment solutions without the need for large scale investment to fund such a project.

In March, VIXIO reported on the news that 20 of the EPI’s 33 member banks had quit the project, including all Spanish shareholders, and German banks Commerzbank and DZ Bank.

According to Zach Meyers, senior research fellow at the Centre for European Reform, speaking to VIXIO at the time: “In the end, although there was political pressure for banks to back a European solution, it is more profitable for banks to continue to rely on Visa and Mastercard, rather than spending vast sums of money on a business model that looks unlikely to succeed.”

This investment shortfall was raised by EPI chief executive Martina Weimert, speaking at Money 20/20 in Amsterdam, who said that the EU authorities pushing for the pan-EU payments project need to put their money where their mouth is.

“You say you want a European solution? You want independence? You want the market to catch up? You want to be quick? Well then, support it financially.”

The linkage between Bluecode and TWINT, as well as the combination of mobile payments services in the Nordics, shows that where there are significant corridors of cross-border payments activity, the market can and is willing to develop the required solutions and connections.

The potential for further linkages and connections among Europe’s leading mobile payment solutions could provide a way forward to realising the goal of widespread cross-border interoperability, as well as strengthening the competitive position of local solutions versus international card schemes and wallets such as Apple Pay.

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