Towards the retail payments of tomorrow: a European strategy
Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at the Joint Conference of the ECB and the National Bank of Belgium on “Crossing the chasm to the retail payments of tomorrow”
Brussels, 26 November 2019
Europe has made important progress towards a true banking union in recent years. We now have a single banking supervisor for significant institutions, a single framework for resolving failing institutions, a single fund to finance those resolution activities, and we will soon have a single backstop for that fund. There are also renewed hopes that political negotiations could soon begin on a European deposit insurance scheme.
The European Commission has also launched an ambitious agenda for creating a capital markets union. Although the pace at which co-legislators, and Member States in particular, have progressed on individual Commission initiatives has often been sluggish, the recent establishment of a high-level expert group might help overcome the remaining impediments and reinforce efforts to make European capital markets deeper and more liquid.[1]
Step by step, we are improving our financial structures to support a single market of half a billion consumers, underpin the stability of our single currency and channel savings towards financing sustainable growth.
One area that has received less attention from policymakers in recent years, however, is the European retail payments market, in particular point-of-sale and online payments. It is true that a lot has been achieved at the back-end of European retail payments systems, most notably under the umbrella of the Single Euro Payments Area, or SEPA. SEPA allows payments to be processed across borders at the same cost, and as efficiently and safely, as national payments.
More recently, the Eurosystem has also introduced TARGET Instant Payment Settlement, or TIPS. This service, which was launched a year ago, enables payment service providers to transfer funds to their customers in real time, around the clock, every single day of the year. And it settles the payments in central bank money.
But progress at the back-end has not translated into similar progress at the front-end, which remains fragmented, with no European solution emerging for point-of-sale and online payments.
National providers in particular have not been able, or willing, to act in a pan-European manner. 20 years after the introduction of the single currency, we still do not have a European card scheme. Ten European countries currently have national card schemes that do not accept cards from other EU countries.
This has led to a notable rise in the use of non-European cards for non-cash payments. At the end of 2016, the share of transactions made with international card schemes was a little more than two-thirds. It is unfortunate that past harmonisation initiatives have failed to explore the significant economies of scale that the Single Market offers.
In addition, the current situation has attracted new initiatives that aim to overcome shortcomings in cross-border retail payments by building a new separate payments ecosystem.
These initiatives highlight the rapidly rising consumer demand for payment services that work across borders and that are also faster, cheaper and easier to use. Among younger people in particular, there is a willingness and curiosity to use new technologies and try new providers.
Relying exclusively on non-European and new ecosystems presents two risks, however.
The first relates to the untested nature of some initiatives. Global stablecoin arrangements, for example, raise potential risks across a broad range of policy domains, such as legal certainty, investor protection, financial stability and compliance with anti-money laundering requirements. Public authorities have made clear that the bar will be set very high for these stablecoin initiatives to be allowed to operate.[2]
The second risk relates to the autonomy and resilience of European payments systems.
Dependence on non-European global players creates a risk that the European payments market will not be fit to support our Single Market and single currency, making it more susceptible to external disruption such as cyber threats, and that service providers with global market power will not necessarily act in the best interest of European stakeholders.
Strategic autonomy in payments is part and parcel of the European agenda to assert the euro’s international role.[3] The rising challenges to our global governance system have contributed to the belief that the EU may be more exposed to the risk that the monetary power of others is not used in its best interests, or is even used against it.[4]
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