mybank

Dear Cathy,

EBA does propose an interesting concept in the online space. However, in my opinion the profileration will not be only limited to web payments and e-commerce MERCHANTS.

If i am not mistaken their proposition is based on the epc's SCT and SDD technologies specifically the eom four corner model which seamlesly connects debtors, corporates (creditors), creditor banks and debtor banks in real time. Therefore, the solution can be employed by any merchant (creditor), whether he provides an e-commerce site (and uses 1-off sdd e-mandates), or performs offline sales transactions, but afterwards uses the solution to issue sdd e-mandates (via e-channels) for recurring payments.

In relevance to online banking account, again just to make sure we are on the same page, i believe what eba wanted to reflect is that the Debtor/Buyer/Consumer uses/is redirected to the e-channels of his Debtor bank (e-banking portal) to view the payment details and authorize or reject them. The debtor doesnot need any special online bank account, he simply uses his BIC and IBAN to perform such opperation. 

If you are refereing to the fact that not everyone has access to their e-banking portals, well then you are right the solution would not work for this segment. however, e-banking portals are quite a wide spread phenomenon in eu (i am assuming, since eu member states generally have high levels of digitization and increasing levels of e-solution adoption - although this is an assumption and i can not provide any raw statistical proof).

Moreover, this payment method tackles a whole new market segment ; this segment is charactarized by sesitive consumers who do not wish to use credit and debit cards for their online transactions due to security and trust issues. It does not try to tackle the same customers who use paypal lets say. Moreover, this solution also tackles the offline customers who are used to pay by cheques, bank notes and TIP (titre interbancaire de paiement used in france). These customers will use the online portals of their merchants to issue direct debit authorizations (e-mandates).

This solution definetly gives benefit over other solutions:

1. Use of e-mandates versus paper mandates for direct debit collections drives down operating costs for merchants tenfold if not more.

2. use of direct debits in online transactions is going to be cheaper for merchants than processing credit card transactions. Now we do not have the exact pricing yet, however the solution's adoption rate will heavily depend on the pricing strategies by creditor banks to their merchants. And if it makes economic and financial sense to merchants to use this payment method(less costly, less risky, more STP), then they would push their consumers to adopt this method.

however, your right, the various ecosystem parties should create necessary strategies and incentives to solve the classical chicken-before-the-egg problem that we have in multiple sided platforms such as payments, to push the banks to take the solution from one hand, and ofcorse the merchants and their consumers from the other.

kind regards

sk