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With key legislative files still to pass the finishing line, EU payments experts have shared their predictions and ambitions for the incoming EU mandate.
The European Parliament elections show the centre-ground holding, with the 720 seats including a projected 185 for the European People’s Party (EPP) and 137 for the Socialists and Democrats (S&D).
Smaller factions such as the centrist Renew party and the Greens have suffered losses, while right-wing parties such as the European Conservatives and Reformists (ECR) and Identity and Democracy (I&D) have gained seats.
This was to be expected, with public affairs professionals in Brussels having previously told Vixio that this was their first time considering building relationships with representatives of ECR and I&D on topics like payments and crypto-assets.
"At EPIF, further integrating the single market for payments is crucial,” said Elie Beyrouthy, chair of the board at the European Payment Institutions Federation (EPIF). “We hope that anti-European extreme right parties won't cause delays, as continued EU payments market integration is essential."
Beyrouthy continued to say that negotiators need to quickly finalise legislation such as the Payment Services Directive (PSD3) and the Payment Services Regulation (PSR), addressing key topics like fraud and establishing fairly distributed responsibility. “We need to get this stuff done, and demonstrate the EU's relevance and positive impact on daily lives through implementation."
However, that could be challenging, with parliamentarians who played pivotal roles in payments-related legislative files having lost their seats.
Michiel Hoogeveen (ECR) from the Netherlands, who negotiated the Instant Payments Regulation (IPR) and recently led negotiations for the open finance framework, and Marek Belka (S&D) from Poland, a former central banker who represented the Parliament in PSR negotiations, both failed to be re-elected.
With new parliamentarians needing to take their seats, it looks like the focus will remain on more or less what it was before — sovereignty.
How to make progress
The need to “make EU payments great again”, as one seasoned Brussels lobbyist recently quipped to Vixio, will remain front of mind for EU policymakers across the institutions.
Emőke Péter, head of European public and regulatory affairs at Worldline, told Vixio that the European Payments Initiative (EPI) and instant payments are verticals that will contribute to this effort.
For example, the previous mandate started to address the questions of strategic autonomy, and the IPR was designed in that context. “If we look back at the 2020 Commission Retail Payments Strategy, ‘competitive home-grown and pan-European payment solutions, supporting Europe’s economic and financial sovereignty’ was part of the vision.”
She added that the future digital euro project could be part of the answer. “It is under preparation but not a finalised project. Further consultation and preparation is needed both on a technical and political level, with the expertise of the industry included."
"While it seems to be a promising tool both for strategic autonomy and digitalisation, there is scepticism whether in its current regulatory design it will be effective,” Péter said. “It is no secret that there are concerns within the industry when it comes to the compensation model. That needs to be addressed before a potential launch."
Speaking about the legislative files in general, Charles Damen, chief product officer at Token.io, was positive.
"What we've seen so far from the commission regarding the PSR and PSD3 has been promising,” he said.
He continued that he thinks the European Commission is genuinely committed to ensuring that national authorities take action against banks for IBAN discrimination and enforce instant payment regulations.
European IBAN, PSD3
Oleksandra Maksymenko, Revolut’s government affairs chief in Brussels, said that the company hopes that the new EU commission will seize the opportunity to create a truly unified single market by creating a European IBAN.
“For nearly a decade, there has been no market where a single European IBAN is universally accepted without barriers across all countries,” she said. “The upcoming term of the European Commission must address whether stronger measures are needed.”
According to Maksymenko, this could include initiatives such as introducing a universal European IBAN or permitting payment service providers to issue IBANs without the necessity of maintaining a branch.
Damen summarised that his hope is that there will be the same level of commitment in addressing obstacles to open banking as there appears to be for topics such as instant payments and IBAN discrimination.
However, others are not so enthusiastic about the commission’s work.
Ralf Ohlhausen, chair of the European Third Party Providers Association (ETPPA), meanwhile praised the PSD3 but warned that the PSR is "very problematic”, suggesting that improvements are necessary during this mandate.
“The commission's proposal was already insufficient, and it has deteriorated further. The Parliament's position, usually more favourable towards fintechs, hasn't been supportive in this case,” he told Vixio. “The Council typically leans more towards the banks’ perspectives, and PSR is no exception. There are significant issues in what is currently on the table."
According to Ohlhausen, as things stand, there are even quite existential issues. These are related to issues such as contingency planning, contracting and the quality of APIs, due to the lack of any incentives that could ensure improvements.
“The proposal to strengthen the gatekeeper position of banks by removing all alternatives to their TPP interfaces is alarming. This approach would leave us at the mercy of banks, which is unacceptable,” he said. “Believing that good APIs can be stipulated and enforced is unrealistic, as there are literally endless ways of circumventing any technical stipulation.”
Ohlhausen, a long-time payments lobbyist, continued that given the rapid evolution of AI and user interfaces it is “absolutely crucial” that PSR and other regulation remains technologically independent.
New files
As for the new mandate, Ohlhausen acknowledged that there is still a lot of regulation in the making that is relevant, with initiatives such as the Financial Data Access Regulation (FIDA) and the digital euro extending well into the next mandate.
“Generally speaking, these are all important and must succeed. However, in all cases, we prefer industry collaboration over regulation and therefore aim to minimise new regulations,” he said. “We don't believe that regulation and compliance will ever be sufficient for creating competitive services. Only industry collaboration can lead to something with sufficient functionality that truly works, such as SPAA [SEPA Payment Account Access]"
Yet, speaking of the SPAA scheme, some believe that the market-led initiative could end up being mandated by the EU, as has happened already with instant payments.
One EU policy specialist told Vixio that “it's a real possibility”. For now, however, the source said that “no one is really talking about it, to not spook the banks. "First carrot, then stick.”
Launched earlier this year by the European Payments Council (EPC), SPAA aims to revive open banking in the EU by creating a stronger business case and addressing the current lack of incentives for incumbent banks.
“We want SPAA to become an alternative form of payment to cards, and believe it could be the start of the API revenue opportunity for banks,” said Damen. “We see very strong merchant demand for this functionality, which creates incentives for banks to adopt SPAA. Though it may take time, banks will eventually recognise the need to adopt SPAA. If not, we anticipate the European Commission may mandate this."
