Payments Insiders Hope For Implementation, Not Regulation As EU Election Begins

June 5, 2024
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The European Parliament’s elections are taking place between June 6 and 9, and with that will come a new mandate for the European Commission. However, payments insiders are hoping for less, not more, from Brussels.

The European Parliament’s elections are taking place between June 6 and 9, and with that will come a new mandate for the European Commission. However, payments insiders are hoping for less, not more, from Brussels. 

The last five years have been intense for both compliance and public affairs professionals in payment services. 

Compliance experts have dealt with the second Payment Services Directive (PSD2), the Digital Operational Resilience Act (DORA) and the Markets in Crypto Assets (MiCA) regulation

Public affairs professionals meanwhile have navigated continuous regulations from Berlaymont, including the Instant Payment Regulation (IPR) the Payment Services Regulation (PSR), PSD3, and the digital euro. 

This has led experts to hope for fewer new announcements from the Commission in the next mandate.

"Looking back at the retail payments strategy, we can see that considerable progress has been made,” said a spokesperson for Payments Europe.

The spokesperson continued that the payments market is functioning very well, and “no major corrections are needed”.

“While the market is changing rapidly and there's always room for improvement, a regulatory pause would be beneficial,” the spokesperson said. “Focusing on the implementation of both current and upcoming legislation is crucial. Let's allow this wave of regulation to settle so we can achieve its objectives."

Meanwhile, Douglas Lockhart, policy advisor on payments and digital finance at WSBI-ESBG commented that it “is unlikely that there will be as many announcements in the next mandate”.

“Numerous regulations are either coming into force or are currently being negotiated, which will keep everyone busy,” said Lockhart. “Effective implementation, or Level 2 work, is as important as the initial initiative and requires careful time and focus of co-legislators and supervisors."

Yet, while work on the Retail Payments Strategy was intensive during the last mandate, it seems that Eric Ducoulombier, the Commission’s payments guru, would be keen for a new iteration. 

“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 during the Banking Scene conference in Brussels last month, emphasising how much the payments market has developed since the last strategy was enacted. 

The new strategy would undoubtedly need to build on and implement laws such as the IPR, PSD3 and PSR.

It is also likely to emphasise Europe's obsession with sovereignty. For example, President Emmanuel Macron of France and Germany’s chancellor, Olaf Scholz, pushed a similar message in the Financial Times recently.

Payments play a crucial role in this sovereignty push, whether through promoting the European Payment Initiative's Wero wallet or advancing regulatory proposals, such as instant payments and the digital euro.

The EU’s bureaucrats are no doubt dreaming of some actual homegrown competition to take on the card schemes from East and West that remain thriving in the trading bloc. 

“There is a lot of demand for an alternative payment method in Europe. Both merchants and policymakers want a compelling alternative to US card schemes,” said Andrei Cazacu, EU public policy lead at TrueLayer. 

He suggested that Europe doesn’t need to reinvent the wheel or create a new closed bank scheme to get it. “It has the main building blocks for an open, agile account-to-account payment method already in place.”

"There have been numerous discussions about making European payments great again,” added Ralf Ohlhausen, chair of the European Third Party Providers Association. 

Ohlhausen continued that while some argue there are too many initiatives, it's not the regulators' role to limit competition. “Instead, [it] should ensure a level playing field. The focus should be on using the existing open banking infrastructure across all of Europe, not adding new infrastructure, like EPI, for a few banks in select markets.”

"The European Retail Payments Strategy requires instant, account-to-account payments, which are potentially superior and cheaper than cards and wallets,” he said, linking to the European Commission’s long-held wish to make instant payments the new normal. 

Ohlhausen references various solutions that already exist, including bank-owned solutions like iDEAL, Swish and Bizum, as well as bank-independent ones from payment initiation service providers (PISPs) like Sofort, Trustly and Tink. 

“While these champions offer perspective, we need a real level playing field. If and when the digital euro, as a public solution, enters the market, even more care must be taken to ensure fair competition,” he said. 

While parliamentarians have been far from enthusiastic about the digital euro, and candidates have largely avoided the subject in their manifesto pledges, it is likely to be one of the key issues of the next mandate, as referenced by Lockhart. 

"The long-term issue remains the digital euro,” he said. “Members recognise that, while it will be expensive, it will also have significant impact across various parts of their operations and the wider ecosystem.”

According to Lockhart, when the European Central Bank (ECB) presents options they are glad to be part of the process, but without impact assessments it is challenging. 

He added that there's no need to rush the situation either, suggesting that it's crucial to take the time to fully evaluate all options, as some may have more significant impacts than others.

“Neither we nor the ECB can be expected to provide effective cost-benefit analyses without initial cost assessments."

Cazacu summarised that the next Commission can and should double down on instant payments, open banking and cross-border payments across Europe.

“For that, we need to see the IPR and the PSR fully implemented, more support for an open banking commercial model like SPAA, and [support for] eliminating IBAN discrimination within the Single Euro Payments Area.”

What the Commission does next remains to be seen, but given the evolving and strategically important nature of payments, policymakers are unlikely to lose focus on this issue, regardless of the election outcome.

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