The EC is pushing for instant payments, wants to turn the EU into global leaders
In the era of Open Banking and digital payments, the European Commission is determined to enable the development of instant payments. Moreover, it has the ambition to turn the Old Continent into the global leader in this area. This wish has recently been reaffirmed by Mairead McGuinness, the European Commissioner for Financial Stability, Financial Services and the Capital Markets Union.
Mrs. McGuinness took the stage during the EPIF’s annual conference, entitled “Payments 2.0: Delivering the European Single Market”, which took place on November 16th and 17th. The event, organized by the European Payment Institutions Federation, brought together key experts to share their insights and vision for the future of the financial services industry – and notably digital and instant payments.
The European Commissioner started her keynote speech by highlighting that “the first Payment Services Directive dates back to 2007, and it was a key milestone in reforming our laws for retail payments.
“Since then, Europe has developed a diverse and competitive payments market. The world of payments is changing rapidly. Digitalisation and innovation have accelerated. New players are entering the payments space and the market is changing. Consumer expectations are changing, too,” she added.
Currently, the Revised Payment Services Directive, adopted in 2015 and dealing with payments in the Single Market, is the main piece of legislation enforced. As explained by the European commissioner, “it enabled Fintechs to access payment account data held by banks in a secure and regulated way. It has provided a solid foundation for Open Banking in Europe and new types of payment services.
“But we need to make sure that our rules are ready for the challenges that come with change. We want to provide the industry with the clarity they need to innovate, while protecting consumers against risks”.
Instant payments are a game changer and we want to be global leaders in this area. The current pace of the instant payments roll-out in the EU is too slow and I am determined to accelerate it with a proportionate initiative planned for mid-2022.#InstantPaymentsEU #MyMoneyEU pic.twitter.com/iq1qaqXRos
— Mairead McGuinness (@McGuinnessEU) November 16, 2021
“Safe, instant, frictionless payments should be the norm in Europe”
As underlined by the European commissioner in her speech, instant payments are a game changer:
the benefits go beyond speed and round-the-clock availability. When combined with new add-on services – such as “request to pay” – they can support innovative business models, like payment initiation services.
Moreover, Mrs. McGuinness explained that instant payments will increase competition and diversify the payment options offered to consumers – which is key, given the current level of market concentration.
She added that “EU payment initiation service providers and Fintechs are also counting on instant payments to scale up their offerings and compete globally,” before listing the main advantages of instant payments – it can dramatically improve international transfers, including remittances.
Becoming a global leader in the area of payments
In 2021, Commission services carried out a thorough assessment of obstacles and enablers for instant payments, including a cost-benefit analysis. Four major challenges standing in the way of progress on instant payments have been identified:
- Reaching critical mass. She highlights: “we need enough players that can send and receive instant credit transfers according to common EU rules”.
- Making sure that consumers are protected. The Commissioner comments: “a number of protective measures are already in place, but fraud evolves quickly”.
- Finding a balanced and proportionate approach to pricing – to ensure that instant payments do not remain a premium service, but become the norm.
- Looking at sanctions screening. “Sanctions are a vital part of our foreign policy. And screening is an essential part of making sure that this action is effective,” adds Mrs. McGuinness.
Mairead McGuinness ended her speech by underlining the necessity of ensuring that existing rules are properly enforced. She notably discussed the review of the Payment Services Directive, which is asking the following questions:
- With new players and services entering payments and the rapid pace of change, is the scope of the regulation right? Do we have a level playing field?
- How can we manage changing consumer expectations – do consumers have the right protection in a changing market?
- Are the current rules on international transactions good enough?
- And more.
The next steps include an external study to examine the outcomes of PSD2 and pave the way for possible amendments, while a public consultation will be launched in the first months of next year.
“Based on the outcome of this fact-finding exercise, we will prepare a report by the end of 2022 for the European Parliament and the Member States. This may be accompanied – or followed – by a legislative proposal if evidence shows that PSD2 needs to be amended,” she then explained.
Source: European Commission