Greece Targets Informal Economy With New Instant Payments Mandates

October 31, 2023
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Greece is stepping up its fight against grey economy transactions with a new bill that will mandate the use of instant payments among freelancers, the self-employed and businesses.

Greece is stepping up its fight against grey economy transactions with a new bill that will mandate the use of instant payments among freelancers, the self-employed and businesses.

This month, Greece’s Ministry of National Economy and Finance presented a new bill that will mandate the use of the IRIS, an account-to-account (A2A) payments system.

As per the draft law, freelancers and self-employed persons are required to set up an IRIS Person to Business (P2B) or IRIS e-commerce account, and cannot refuse IRIS payments from customers.

In addition, businesses that are currently required to accept card payments will be required to accept IRIS payments.

The mandates are set to come into force in December 2024, but they will only affect payments of up to €500, which is the current cap on IRIS transactions.

Kostis Hatzidakis, minister of national economy and finance, said that by using IRIS, businesses and freelancers can accept electronic payments cost-free and can help fight tax evasion.

“These are interventions that combine economic development with social protection,” he said.

Stavroula Kampouridou, CEO of IRIS operator DIAS Interbanking Systems, told Vixio that the mandates will ultimately benefit Greek citizens and businesses.

“With the effective tackling of tax evasion, the Greek government will be able to further lower taxes, direct funds towards more targeted social policy initiatives and apply a fair tax collection policy.”

IRIS takes off following rebrand

The IRIS service umbrella currently consists of IRIS P2B, IRIS Person to Person (P2P) and IRIS e-commerce.

IRIS P2P enables direct transfers from one individual’s account to another, while IRIS P2B enables direct transfers from an individual’s account to a freelancer or a small or medium-sized business (SMB).

To open an IRIS P2B account, users require a smartphone, a mobile banking app and must complete a one-off registration.

To make P2B payments, the payer must know the payee’s VAT or mobile number or have access to the payee’s IRIS QR code.

Although IRIS launched in 2016, it was not marketed under a common brand name until 2021. Prior to that, the service was given different names by the different mobile banking apps that connected their users’ accounts to the network.

“Up until 2021, there was no clear strategy or brand name for the promotion of IRIS services, resulting in a significant gap in relation to the potential of the product,” said Kampouridou.

Following the rebrand, use of the IRIS network has increased rapidly. In the last two years, the total number of IRIS P2P users has more than doubled — from 800,000 to almost 2m.

In the first nine months of 2023, Kampouridou said IRIS P2P transactions have increased by 267 percent compared with 2022 and by 965 percent compared with the same period in 2021.

The growth of IRIS P2B has been similarly explosive. IRIS P2B currently has 120,000 users, compared with 77,000 at this time last year.

Its transactions have also increased by 187 percent so far in 2023 compared with the same period last year, and by 461 percent compared with two years ago.

With about 1.3m freelancers in the country, Kampouridou said this growth is expected to accelerate following the introduction of the mandates.

IRIS 'future-proof' ahead of new EU regulations

In October 2022, the European Commission introduced a new proposal to make euro instant payments universally available to all citizens and businesses with a bank account in the EU and EEA.

The mechanism for achieving this goal would be to mandate that all payment service providers (PSPs) that currently offer credit transfers must also offer instant credit transfers.

The proposal has not yet been enacted into law, but if it is, Kampouridou said, DIAS will be in a good position from a compliance perspective.

“As IRIS is based on SEPA instant credit transfer rails, it can be considered a future-proof payment solution in light of the commission’s proposal, and thus a contributor towards a cashless and tax-fair society,” she said.

Borna Novak, founder of Field39, a Croatian payments software development and consultancy firm, said that in technical terms, IRIS payments are SEPA transfers in “disguise”.

“IRIS is a SEPA transfer service disguised as a single wallet for branding and market penetration purposes,” he told Vixio.

“It looks like a single wallet, but the funds are stored in Greek bank accounts, thus fostering a competitive landscape for the banks to compete in.”

Novak drew a distinction between the open ecosystem provided by IRIS and the closed-loop ecosystems of China’s WeChat Pay and Alipay.

“That scenario is a kind of innovation desert,” he said of China’s payments giants, “where two apps rule them all and there is no need for a third.”

He added that from the cost-free nature of IRIS, it is “easy to deduce” that payments are not the product but the “carrot that brings users to the product”.

“The real product is reduction of the ‘informal economy’, and subsequently greater taxation, greater liquidity in the banks and higher revenues in the state coffers.”

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