The European Central Bank is floating the idea of using instant payment rails to link up national card schemes as a means to break the duopoly enjoyed by Visa and Mastercard, who between them account for over 80% of all EU card transactions.
The ECB has for the past twelve years been seeking a mechanism to challenge the dominance of Visa and Mastercard in the European payments landscape. Interchange fee caps have brought a measure of control, but calls for banks to set up a rival third scheme to take on the might of the global giants and promote increased competition have so far fallen on deaf ears.
In a presentation at the American European Community Association in Brussels, ECB board member Yves Mersch lamented the bloc's failure to implement a true Singe Euro Payment Area (Sepa) for cards.
"Cardholders cannot use their national payment cards to make payments across Europe unless they go through a global card payment scheme that can execute such intra-European payments," he notes.
In this respect, the arrival of instant payments across the continent could be a game changer.
"The industry sees the implementation of a European infrastructure for instant payments as an opportunity to instantly clear and settle card transactions, which would offer a possible way of supporting the interlinking and interoperability of national card schemes," he says. "Efforts to ensure the interoperability of schemes should be strengthened and should aim to foster a European identity, for example by using a common European logo to show users that their cards can be used across the EU."
A more radical supposition entails the extension of instant payments to the point-of-sale, bypassing traditional card schemes altogether.
"For merchants, instant payments at the POI (point of interaction) could be a cost-efficient alternative to cards," says Mersch. "Such solutions are currently emerging across Europe. It is important to ensure that they have pan-European reach so that end users can make and receive payments without restriction across national borders"
To this end, the Euro Retail Payments Board - set up by the ECB to help foster the development of an integrated market - has established a working group to analyse in detail the barriers to pan-European reach and usability and ways to overcome them.
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