“Sound of Finance”: focus on the payments regulatory framework
Our CCO Anne-Sophie Morvan recently participated in zeb’s Sound of Finance podcast. The session, moderated by Clara Cardaun (Senior Consultant, zeb), also featured Nikola Jelicic (Expert Partner, zeb), with the topics of Open Banking, FiDA, Wero and Instant Payments – as well as Verification of Payee – being discussed.
The host started the session by highlighting that the world of payments has been shaped by innovation, new technologies, and regulatory interventions in recent years. Open Banking has opened new doors with PSD2, Instant Payments will soon become mandatory across Europe, and initiatives like Wero are Europe’s attempts to establish its own payment alternatives. She added: “Moreover, new regulations such as the Financial Data Access Framework and the Payment Services Regulation are looming – with potentially major impacts on payment service providers and customers”.
Where do we stand today in European payments? What challenges need to be overcome? And how can payment service providers seize the opportunities arising from these developments? Before getting into the discussion, Anne-Sophie Morvan went over the creation of LUXHUB, its main goals and current projects.
LUXHUB, a leading Open Banking API platform
As explained by Anne-Sophie Morvan, LUXHUB was founded in 2018, in the wake of PSD2. “Our shareholders – four Luxembourg banks – joined forces to build an API platform that would help them comply with PSD2 requirements. Today, this Open Banking compliance service is used by 35 customers in several European countries,” she added.
Since then, the company has developed additional compliance services for PSPs (Payment Service Providers) notably around the topics of CESOP and Verification of Payee (VOP), recently. “Moreover, we are also working on major projects in the field of Instant Payments and the rollout of Wero in Luxembourg,” highlighted Anne-Sophie. She also underlined that all of these activities are conducted under the supervision of the Luxembourg financial supervisory authority – both as an IT service provider and as an AISP/PISP (account information and payment initiation service provider).
As a member of the Executive Committee, Anne-Sophie Morvan is responsible for commercial and legal activities: “Since we operate in a highly regulated environment, our legal, product, and sales teams work very closely together. That is why I oversee both areas – which is rather unusual, but has proven very helpful in our sector”.
According to Anne-Sophie, legislators have been very active in the last years – and in such an environment, working in close collaboration with them is clearly an advantage. She adds: “Beyond regulation, I find it fascinating to observe innovation in payments and to think: How will we pay in five to ten years? And how will we – and the next generation – organize our financial lives? These are very exciting questions”. As a matter of fact, several regulations have started to transform financial services and especially the payments landscape, and more are expected in the next months.
Regulations are reshaping the financial services industry
Nikola Jelicic first explained that the Payment Practice at zeb advises clients across Europe on their complete payments agenda: “Many projects, such as the introduction of Instant Payments, are driven by regulation. However, there is always a strategic flavor to such projects: some PSD2 implementations turned into Open Banking projects”.
From Open Banking to Open Finance
Open Banking has existed for six years now, “and a lot has happened in that time”, commented Anne-Sophie Morvan, who then explained that currently 125 AISPs and 197 payment institutions are offering both Account Information Services (AIS) and Payment Initiation Services (PIS) in the EU.
Usage, however, varies from country to country. For instance, in the case of PIS, more and more merchants are offering the “Pay by Bank” solution, even if French customers are used to paying by card, and hardly use anything else – even though things are slowly changing. In Germany, on the other hand, “Pay by Bank” was, for years, the only option for people who did not have a credit card. “This shows that payment habits are decisive for the success of payment initiation”, she underlined. When it comes to AIS, such services are particularly successful with companies that leverage payment transaction data, especially for accounting purposes. Many AISPs are integrated directly into ERPs (Enterprise Resource Planning) – through partnerships – and if the AISP is also offering PIS, the customer can trigger payments directly from the ERP application.
According to Nikola Jelicic, “although Open Banking in Europe is not a revolution, even less would have been achieved without regulation. The fragmented European market needs regulation to move forward. Added to this is the strategic ambition of many of our clients to position themselves beyond the regulatory minimum.”
On the FiDA topic, Anne-Sophie reminded that the trilogue negotiations are currently going on: the European Parliament, the Council and the Commission are working on a final version. The Danish Council Presidency has taken over since July 1st, and a finalization is expected in the coming months, even if many points are still disputed.
She added: “In the last text version the scope was reduced: the definition of “customer” is limited to retail customers and SMEs; large corporates would be excluded. Nevertheless, as with Open Banking, uniform access to financial data would be a major step forward”.
If data access makes sense for retail customers, it is even more important for companies to dive into FiDA as they would make an interesting use of it. With regards to payment data, the offering is limited, for now, as it mainly concerns credit card data. “Data such as savings accounts, securities or insurance data together with payment data can be extremely helpful — and on this basis exciting use cases can be developed,” underlined the LUXHUB CCO.
Instant Payments & Verification of Payee
In several countries, Instant Payments are already widespread, and it promises to be a major change in others. In this specific case, technology is not enough, and the two experts agreed: “customer demand is decisive. And even if they might not request it at first, experience shows that they usually do not want to live without it after several months”.
Moreover, it is important to note that Instant Payments are a great advantage for Open Banking payments, as, through the immediate confirmation of a successful payment, the merchant trust increases.
The introduction of IPs nevertheless entails risks due to the immediate settlement. “The regulatory answer to this important challenge is, among other things, the Verification of Payee. It was introduced for fraud prevention and has been implemented in Europe for SEPA credit transfers across almost all payment initiation channels,” added Anne-Sophie Morvan.
Payment Services Regulation
The discussion continued with the PSR topic – with its stricter liability rules – and how it will impact PSPs in terms of compliance and risk. Nikola Jelicic started: “PSD2 has several successors: PSR will be a centrally applied regulation while PSD3 will be a directive with national implementation. Regarding fraud, tougher liability rules are added and this specific topic is therefore centrally tackled in the Payment Services Regulation.
Wero, a European alternative in payments
The experts then discussed EPI’s Wero, which intends to create a pan-European payment alternative, and which was launched in July 2024. As explained by Nikola Jelicic, “This P2P use case is the key to consumer’s hearts, but it can also be used by professionals. E-commerce and POS will follow and these will be the key to monetization”.
According to Anne-Sophie Morvan, Wero can succeed in Europe if several conditions are met: it must be very easy to use, and it must work across Europe. Nowadays, there are many local solutions – Bancomat in Italy, MB Way in Portugal, and more, as part of the EuroPA alliance (European Payments Alliance) – which recently met with EPI to find a way to work together and rapidly strengthen Europe’s sovereignty in (cross-border) payments. Also, she added that for Wero to succeed, it needs to be accepted by merchants, which seems to be on a very good way given the number of partnerships with acquirers recently announced.
Standards & “Standards fatigue”
Clara Cardaun then introduced the standards topic: “there are now a lot of standards around payments, some of which entail a high implementation effort for platforms, providers and banks”. She then asked Anne-Sophie her thoughts and how LUXHUB is dealing with balancing such requirements with the ability to innovate.
The LUXHUB CCO highlighted that there are already quite a number of standards in the payments area and also in Open Finance. She believes that “we should build as far as possible on what already exists and is widely accepted”. She added: “at LUXHUB, we therefore try to use the PSD2 APIs as far as possible for a wide variety of use cases. It has two advantages: first, it reduces the efforts for everyone involved. And second, it shows banks that their Open Banking investments can also be used for another purpose.
And when we talk about the upcoming FiDA schemes, it would make sense to also look more closely at the work under the EPC scheme SPAA (SEPA Payment Account Access) or the Berlin Group”.
On the other hand, Nikola Jelicic underlined that “the possibilities of existing standards are not yet exhausted and already new ones are in use or announced. This leads to a minimalist approach of pure regulatory implementation without innovation. I call this standards fatigue”.
Looking at the near future
The podcast ended with the experts projecting themselves in three years: which developments, whether technological, regulatory or market-driven, could make the payments sector stronger — and what opportunities could arise from them? What can customers expect from the payments sector in the coming years?
Anne-Sophie Morvan focused on three main pillars:
- Security: fraud prevention through various AI based tools will play a decisive role, because the faster payments are processed, the more important it becomes to recognize and prevent risks intelligently.
- The spread of sovereign payment methods: Europe is working to establish its own independent solutions — and that is exactly what will shape the market in the long term.
- Preparation for PSR and FiDA: realistically, these regulatory frameworks will probably apply from 2027 onwards — but preparing for them in good time will be decisive.
As for Nikola Jelicic, “the announcement of the digital euro will drive a lot of prioritization in banks. Until then I expect work on the further development and marketing of Wero and implementation of PSR. For consumers, the payments landscape will initially become more complex before everything becomes simpler again. In this simplification or convergence of different payment services and types, banks are required: the ones that will manage it will be the winners”.