The European markets have always been competitive and innovative when it comes to the FinTech ecosystem. Recently on Jul 2, 2020, the European Commission (‘EC’) issued a statement conveying that 16 (sixteen) major Eurozone banks from Belgium, France, Germany, Spain and the Netherlands have reached an agreement towards the creation of a unified payments solution for various merchants and consumers. The European project shall be extremely beneficial for ease of access in cross border payments and is in line with the EC’s initiative for creating a retail payments infrastructure across Europe. The initiative taken by the banks shall help creating a payments card and digital wallet and shall also cover in-store, online, person to person payments as well as cash withdrawals on a Pan-European basis.
The European Payments Initiative (‘EPI’) shall enable payments in a fast and efficient manner and help the markets remain competitive. The 16 banks are the first to join the unified payments network, and Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People, stated that he hopes for more banks to join and provide expertise to make the payments inclusion initiative competitive at a global level. The EPI is currently in its implementation phase and is likely to be fully operational by the year 2022. Moreover, the European Central Bank (‘ECB’) in its press release, stated that it is in full support of the various banks’ initiative to join the EPI and shall also be working on a Pan-European card and digital wallets solution for European retail payments market.
Earlier, European stakeholders had also made significant progress in payments inclusion network through the Single Euro Payments Area (‘SEPA’). However, currently there exists difference in implementation of various schemes and the behaviour of various European citizens in their payments pattern. It shall also be noted that major European nations have already joined the SEPA and even the United Kingdom (‘UK’), post BREXIT, shall be allowed to retain its membership with SEPA. Hence, it has become extremely crucial for introduction of a unified payments scheme. Currently there are 10 (ten) European countries which do not accept payments from other European Union (‘EU’) member states and have their own national payments card schemes. However, even non euro-zone states such as Bulgaria, Iceland, Sweden Poland, have already joined the SEPA for payments inclusion. With the growing usage in mobile and digital wallets in the EU, it has become extremely crucial to introduce a unified payments solution for the markets. The ECB plans to do away with the existing fragmentation in retail payments across Europe. Since, the EPI will be based on SEPA, it can capitalise on the existing payments network such as the Eurosystem’s TARGET Instant Payment Settlement (‘TIPS’). TIPS is the new payments interface of ECB which was launched in November, 2018. As per the ECB, “It enables payment service providers to offer fund transfers to their customers in real time and around the clock, every day of the year. This means that thanks to TIPS, individuals and firms can transfer money between each other within seconds, irrespective of the opening hours of their local bank”.
What needs to be understood on the current EPI regime and various other initiatives for payment inclusions is that how good would they hold when Central Bank Digital Currency (‘CBDC’) are launched. Various countries in the SEPA such as Sweden are planning to introduce their pilot scheme for CBDCs. With the introduction of CBDCs, nations shall have alternative forms of reserve currencies. Hence, would a Pan-European payment interface still be profitable for all EU nations or countries shall enable amendments into their payment inclusion initiatives to favour their CBDCs?
Comments