With payments revenue taking a massive hit in the face of the Covid-19 pandemic, the European banking industry is looking to the future, setting out its vision for the future of the market.
McKinsey is forecasting a dramatic decline in payments revenue as the Coronavirus crisis hits economic activity across the globe.
But the European Banking Federation (EBF), European Association of Co-operative Banks (EACB) and the European Savings and Retail Banking Group (ESBG) point out that the crisis has brought to the fore the importance of well functioning payments services.
The three groups have spent the last few months putting together their vision for payments in the EU over the next five years, as they seek to meet changes sparked by a mix of evolving customer needs, regulatory action, technology and innovation, and increased competition.
Top of the list of priorities is the importance of developing instant payments across the EU that allows for both the differentiation of EU companies and the reduction of dependency on the dominant non-EU payment card schemes.
States the paper: "This creates a reliance on such players, which can become a risk from an economic, political, operational and privacy perspective. The threat of undesired dependency increases when considering the growing global BigTech interest in payments. Dependency on such actors for basic EU internal market functions underpinning the economy - starting from payments but likely expanding to consumer finance, mortgages and other financial services - may bring detriment to the European economy.
"From a data privacy perspective, global Big Tech’s existing data superiority combined with access to payments data should be concerning and could lead to unintended negative outcomes for EU citizens."
European banks are working under the umbrella of the Pan European Payment System Initiative to provide an alternative to Visa and Mastercard, but acknowledge that the effort requires substantial investment. In return, they are asking for "concrete support" from policy makers to help achieve their objectives, including a leveling of the playing field between banks and Big Tech competitors. This would entail actions to open up NFC chips and biometric identity readers provided by the likes of Google and Apple, and a mutually-beneficial approach to data sharing that recognises the current asymmetries in data access.
The partners argue that it is time to reap the full benefits of PSD2 and beyond, as 'open payments' see the further expansion of data sharing, including beyond financial services. They also highlight the importance of balancing digitisation with financial inclusion and a common approach to digital currencies.
Says the paper: "The European payments landscape is at a crossroads. Payments are the bloodline of the European economy and are thus important for the sovereignty of the European Union.
"For an ambitious and unprecedented shared vision to materialise, an extensive investment from the banking sector is required but also unprecedented and concrete support from public authorities will be needed."
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