Interbank payment systems may have to be redesigned to cope with the emergence of new electronic payment instruments, according to a policy paper issued by the European Central Bank.
The paper presents a first comprehensive investigation by the Eurosystem into retail e-payments. It has been released by the ECB for public comment in advance of an invitation-only conference - E-payments in Europe - that the ECB has organised for November to focus on issues related to e-payment initiatives, security and standardisation.
The e-commerce market in Europe was valued at €14 billion in 1999 and €95 billion in 2000, reflecting growth of 680%. The increasing use of new communication technologies and the need for specific payment mechanisms for e-commerce have created opportunities for new intermediaries to facilitate the sending and processing of payment instructions, notes the ECB. At the same time, banks have also developed new means to access customer accounts and to originate payments.
In line with its mandate to promote the smooth operation of payment systems, the central bank says it intends to act as a catalyst to encourage the development of an adequate legal structure and interoperable security framework that could foster the use of e-payments.
The paper suggests that e-payments may impose special requirements on interbank payment systems. Requirements for efficient interbank settlement could include the choice of message standards that are compatible with other parts of the electronic payment process, operational procedures such as increased real-time processing, and standardised information in the payment message to allow automated reconciliation of payments at the beneficiary level.
"These and other possible requirements of e-payments should be taken into account in the development of retail clearing and settlement infrastructures," says the ECB. "The Eurosystem will closely follow the creation of pan-European systems from this perspective."
The ECB says it is currently investigating the implementation of existing standards throughout the e-payment process and areas where further standards would be needed to enable full straight-through processing (STP) from payment presentment to payment reconciliation.
With a view to meeting the right balance between cost and efficiency, the ECB says it will work with market participants to develop general security guidelines, security objectives and possibly more detailed security requirements. It believes that the Eurosystem’s security objectives for e-money systems could serve as a basis for other e-payments.
To read the full paper, go to:
>E-Payments in Europe - the Eurosystem's perspective