With regard to payment-related functionalities that go beyond the scope of PSD2 and that are required by TPPs (such as payment guarantees, delegated SCA, etc.), we believe these should be elaborated through a coordinated market-driven initiative within the Euro Retail Payments Board (ERPB) SEPA API access scheme work. The ERPB should seek to start working on a scheme as soon as possible, building on the work already carried out within the ERPB. The various business models of TPPs (pre-PSD2 TPPs and post-PSD2 TPPs) should be fairly represented in these ERPB discussions though.

Finally, with regards to interchange fees, ESBG welcomes the European Commission report published in 2020 and supports the conclusion that there is currently no need to revise the IFR.

Identified Concerns

PSD2-supported access to payment accounts data has fostered the entry of new players within the payments industry, acting as payment initiators or account aggregators. Banks welcome innovation and competition by new payment service providers. However some of these new players are driven by business models that are cross-subsidised by customer engagement and commercialised data profiling, which creates pricing of the actual payment service that traditional banks cannot match. The fact is that banks are required to provide these new entrants with access to payment account data without being compensated for the investments that banks need to make.

Therefore, we believe that the full benefits of ‘open payments’ beyond PSD2 and further expansion of data sharing can only be reaped if done on the basis of mutual benefits and a fair distribution of value across market players. For instance, taking payments beyond PSD2 should be developed through coordinated market-driven initiatives such as establishing a SEPA API access scheme. The Payment Accounts Directive (PAD) requires banks to provide bank accounts to all types of European consumers, regardless if they are profitable or not. Additionally, it is worrying to observe that some TPPs still deploy direct access to customer accounts via screen-scraping or reverse-engineering even though they are required to use the dedicated interface (if provided) in accordance with their PSD2-licence.

The payments market in the EU continues to undergo fundamental shifts due to a mix of regulatory changes, changing customer behaviour and demand, and technological development, resulting in a multitude of service offerings. Cards are still the most commonly used electronic payment instrument for consumer-to-retailer payments in the EU, and card payment volumes have more than doubled in the last ten years. COVID-19 is also accelerating consumer and merchant trends away from cash and towards contactless and electronic payments (of which many are card-based). In this respect, it is important to create the best possible environment for existing European schemes and future pan-European payment solutions to be innovative and reliable. The IFR is a crucial piece of legislation as it creates a stable legal environment on which such pan-European solutions could be built upon and flourish. ESBG believes that amending the IFR would have detrimental effects, especially on competition and innovation.

Why Policymakers Should Act

​New technologies are currently shaping how people interact and engage in commerce. For the market acceptance of payment methods, it is important for the whole payments industry to be able to develop and be integrated into new technologies. However, it is currently very difficult for the industry to set out a clear and consistent strategy for the years to come, within a stable regulatory framework and through returns on investments. ESBG considers that the following aspects are essential to a successful payments strategy for the European Union:​

• A level playing field where players of all sizes have the opportunities and incentives to invest and profit from innovation by providing a stable and harmonised regulatory and supervisory environment;
• Ensure strong customer authentication and data protection;
• Ensure non-discriminatory access by PSPs to vital components (e.g. NFC or biometric identity readers) of mobile devices;
• Provide certainty about business models in card payments by maintaining the framework of interchange fees stable;
• Allow for sound and long-term sustainable business models.​

Background

The European payments market has undergone fundamental shifts over the past years, sparked by a mix of changing customer needs, regulatory action, technology and innovation, and increased competition. The revised Payment Services Directive (the so-called PSD2) entered into force as of 13 January 2018 with the objective of making payments more secure, boosting innovation and helping banking services to adapt to new technologies. In a nutshell, PSD2 enabled third-party providers (TPPs) to build financial services on top of banks’ data and infrastructure by accessing bank customers’ payment accounts through online interfaces. This allowed both retail and corporate customers to use licensed TPPs to support managing their payments services with their banks. The European Banking Authority (EBA) then published a set of Guidelines, Regulatory Technical Standards (RTS) and Opinions to drive the technical implementation of the PSD2 and to specify the conditions that need to be met in order for banks to restrict access to payment accounts exclusively through dedicated interfaces (APIs).

The Interchange Fee Regulation (IFR) aimed at fostering the competition in the market of EU card payments by introducing caps for hitherto high interchange fees for consumer debit and credit cards, therefore setting harmonized ceilings for interchange fees for consumer cards in the EEA. Overall, major positive results have been achieved through the implementation of the IFR. Notably, interchange fees for consumer cards declined and this decline was reflected in reduced merchants’ charges for card payments, resulting ultimately in improved services to consumers or lower consumer prices. Additionally, market integration improved through the increase in cross-border acquiring activities, although their uptake remains quite limited. The Commission, as part of the mandatory review of the IFR, has published a report concluding, inter alia, that major positive results have been achieved through the implementation of the IFR, including but not limited to reduced merchants’ charges resulting ultimately in improved services to consumers or lower consumer prices and enhanced market integration. Given the positive impact of the IFR and the need for more time to see the full effects of the Regulation, the report is not accompanied by a revised legislative proposal.