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A senior EU official has highlighted the need for an updated retail payments plan to address rapid changes in the payments landscape, such as the rise in big tech.
The EU institutions should establish a new framework along the same lines as the 2020 Retail Payments Strategy to bring it up to date with new developments, Eric Ducoulombier, head of unit for payments at the European Commission, said at the Banking Scene conference in Brussels on May 21.
The 2020 Retail Payments Strategy was the driver for proposals such as the Instant Payments Regulation (IPR). It emphasised four pillars for EU retail payments markets: pan-European reach; innovation and competitiveness; interoperability; and international reach.
This blueprint serves as the roadmap guiding subsequent actions, according to Ducoulombier, who said that the commission’s responsibility lies in catalysing and setting priorities.
“For the next phase, which will start later this year with a new European Parliament and Commission, we will need a new blueprint and roadmap for the next years to come,” he said. Europeans will vote for new members of the European Parliament in early June; post-election politicking will then select a new president of the European Commission.
Ducoulombier said that he would put his ideas to his “future political masters” in the commission once they are in place. “That will be my message to them. The payments world is changing at a rapid pace, and our retail payments strategy of 2020 was excellent, but of course, five years in payments is a lot.”
Everyone can observe what has happened since the last Retail Payments Strategy was implemented, Ducoulombier said. “Acceleration of digital payments and the emergence of geopolitical environments that create more importance for sovereignty, as well as the keen interest shown by big techs for payments and the critical emergence of wallet.”
“All of this is not entirely new, but it has taken on a new dimension,” he said. “This is what we should reflect upon and base our new strategy on.” It is the European Commission's obligation and duty to create a necessary, conducive framework, he said.
Pan-EU service…
The question of European sovereignty in payments was a key component of this commission mandate beginning in 2019, with various initiatives and regulatory proposals unveiled such as the digital euro, instant payment regulation and the payment services package.
“We would like to see homegrown, European payment solutions emerge,” said Ducolombier, which means companies operating and owning European payment services. “The ownership has to be European.”
“We believe it is very important that the decisions that this payment company will take will be made by Europeans for European interest,” he said. “For us, politically, that is what it means.”
However, Ducolombier shied away from the possibility of European government funding, stating that it is a complex issue, particularly in relation to state aid.
While some sectors have successfully utilised such funding, like batteries, Ducolombier said that it is advisable for companies to aim for sustainability and growth without relying on funding from the commission.
He noted that there has been no EU funding for the European Payments Initiative, for example, despite political support from the commission since its inception in 2020. “In modern economies, it is probably good for a company to operate independently, without relying on EU or national funding,” he said.
… at what cost?
Saar Carre, head of payments and daily banking at Belgian trade association Febelfin, said that EU regulations need to be better harmonised for these types of projects to take off.
Carre warned that regulation remains contradictory in some areas, highlighting that issues with the General Data Protection Regulation and the Payment Services Directive still need to be resolved, even though they have both been in place for more than five years.
She continued that it is essential that the market has enough flexibility to develop these homegrown initiatives. “Something that we sometimes forget in this whole discussion is the customer at the end who will use this pan-EU solution,” she said.
“If you go out in the street today and ask the customer where the company is based behind their credit or debit card, I don’t think they would know it and if they know it's not a European country, I am unsure it would bother them.”
Carre continued that there is a need to educate customers and raise their awareness, stating that if a pan-EU service is created, it must differentiate itself from existing services. It is up to payment service providers to identify the unique feature that will make customers want to use a pan-EU service, she said.
Considering the heavy EU focus of the panel, Katja Lehr from JP Morgan jokingly referred to herself as "an enemy". The EMEA payments chief emphasised, however, that "a strong, competitive European market is crucial".
“The solution we are all striving for and looking to achieve should be governed by the commission,” she said, adding that the focus should be on infrastructure.
“I’d like to compare it to listening to music, yes I want the infrastructure through which the music runs, like the hardware and software, being European. But the music I play on that hardware and software should be free,” she said.
Infrastructure should be owned by European companies and organisations, said Lehr. But when it comes to what is done with the infrastructure and the products offered, innovation should be encouraged, and anyone with good ideas should have the opportunity to contribute to its utilisation.
When examining data, whether stored on the cloud or elsewhere, and regardless of its locality, Lehr said, the global context should not be ignored. “We are a global bank, we have customers all over the world.”
“What could be lost is the ability to look at things holistically,” she said. “From a risk management perspective and the ability to offer products, that is going to be very much limited if you have to always keep everything local.”
