ECB offers support to bank-backed alternative to Visa and Mastercard

ECB offers support to bank-backed alternative to Visa and Mastercard

The European Central Bank has welcomed an initiative by some of Europe's top banks to explore the development of a rival payment system to challenge the dominance of Visa and Mastercard and the threat from Chinese and US Big Tech firms

Backed by twenty French and German banks, the The Pan European Payment System Initiative (Pepsi) would seeks handle all forms of cashless transactions.

The ECB has long-floated the idea of a home-grown cross-border scheme capable of taking on the big brands, but so far without success.

In a speech to a central bank summit in Brussels, ECB board member Benoît Cœuré, says: "The Eurosystem welcomes the strategic initiative of a number of major European banks to create a true pan-European retail payment solution that has the potential to meet the vision of our strategy. The proposed solution would be based on the Sepa credit transfer instant (SCT Inst) scheme, which is in our view the correct approach as it is future-oriented. And it could capitalise from day one on existing powerful and sophisticated infrastructures, such as the Eurosystem’s TIPS."

Cœuré calls on the banks backing the scheme to develop a clear roadmap "so that we can see tangible actions emerge soon".

He also hinted at public policy initiatives to help such private sector solutions along, for example by imposing legislation obliging payment service providers to adopt instant payments within a certain period if a critical mass has not been reached by, say, the end of 2020.

"For its part, the Eurosystem stands ready to provide additional technical assistance where useful and required," Cœuré adds. "For example, we will analyse how we could support the search for solutions that ensure that SCT Inst-compliant clearing mechanisms can be fully integrated. Current private solutions for the clearing of instant payments still have not addressed interoperability issues in a satisfactory manner. This requires further analysis and action."

He also suggests that central banks should step up their research into the development of digital currencies as demand cash for tails off.

"A central bank digital currency could ensure that citizens remain able to use central bank money even if cash is eventually no longer used," he says. "A digital currency of this sort could take a variety of forms, the benefits and costs of which the ECB and other central banks are currently investigating, being mindful of their broader consequences on financial intermediation."

Comments: (9)

John Brawley
John Brawley - Elavon - Glasgow 26 November, 2019, 10:39Be the first to give this comment the thumbs up 0 likes

Very interersting article. Could shake up the Payments world. 

Craig Lawrance
Craig Lawrance - Starkspur Ltd - Chalfonts 26 November, 2019, 10:44Be the first to give this comment the thumbs up 0 likes

I love this idea. The creation of competitors by commitee.  Didn't PayFair try this years ago?

Ben Davies
Ben Davies - Cubic Transportation Systems - Sydney 27 November, 2019, 00:25Be the first to give this comment the thumbs up 0 likes

Weren't the Russians supposed to be doing something like this? Haven't heard much about that lately...

It's an enormous undertaking that'll take many years to design, build, test and launch, and the incumbents in this space are extremely well funded and notoriously anti-competitive.

And for God's sake, please don't call it Pepsi!!

Alexander Mifsud
Alexander Mifsud - - London 27 November, 2019, 09:282 likes 2 likes

Perhaps a more viable approach would have been for PSD2 to stipulate robust interoperability and data standards available to all TPPs, plus minimum banking standards of conduct for disputed transactions with a body (EBA?) as arbiter.  That would have made it so mch easier for PoS providers to invest. PSD3 maybe? 

Emmanuelle Johaadien
Emmanuelle Johaadien - Weavr - London 27 November, 2019, 09:58Be the first to give this comment the thumbs up 0 likes

whereas P27 solves a problem, am not sure what really drives this initiative. Feels like it is another lobby getting its way, quite possible led by the CB lot.

Craig Lawrance
Craig Lawrance - Starkspur Ltd - Chalfonts 27 November, 2019, 11:211 like 1 like

@BenDavies yes the Russians created the MIR card scheme, it's alive and well

Nick Collin
Nick Collin - Collin Consulting Ltd - London 27 November, 2019, 11:551 like 1 like

This idea seems to crop up every 5 years or so in one form or another but never come sto anything.  What happened to Monnet, EAPS, PayFair?  My bet is the MasterCard/Visa duopoly will reign supreme for the foreseeable future.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 27 November, 2019, 16:34Be the first to give this comment the thumbs up 0 likes

To that list, let me add myBANK. With SCA, EU is taking a step or two back in cashless payments adoption.

Marten Vill
Marten Vill - LHV Bank - Tallinn 29 November, 2019, 10:281 like 1 like

Whatever the actual plan and reasoning behind it, it should take advantage and compliment the PSD2 API and Open Banking ecosystem and everything that was already lauched this year. So much work has already been done and generally in the right direction. Building another scheme from scratch would waste huge amounts of resources and development effort again with questionable value. With too many parallel systems especially the smaller banks are not even able to support them and these who can will lose focus. As a result - worse quality, less innovation and good competition and Eurozone as a whole will fall behind. Both cards and Open Banking in essence are actually just access chemes for some 3rd parties to execute bank2bank payments from customer accounts.

As I see it the current PSD2/Open Banking world needs some improvements to satisfy all what described above:

* easier and more straight-forward access to the system. Many Start-ups and even older-players are struggling to aquire the licences, certificates etc.

* harmoziation of standards - actually a one single standard would be best. Currently it is a mess out there with that one.

* services and fuctionality - some basic things are optional and some are mandatory that no-one uses

Hope the decision-makers will do the right thing:)