Below is the introduction and executive summary of a paper (.pdf) by the European Association of Co-operative Banks (EACB), the European Banking Federation (EBF) and the European Savings and Retail Banking Group (ESBG), collectively representing the European banking industry and together referred to as the European Credit Sector Associations (ECSAs).
>> See entire policy paper (.pdf)
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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. A key success factor is a long-term sustainable business model that is beneficial to all stakeholders and will enable banks to finance the considerable investments to set-up new payment solutions. The relevant public authorities should assist the market players in finding the appropriate tools to create a strong business model that works from both an economic and competition perspective, and that matches the expectations of all stakeholders involved.
The European payments market has undergone fundamental changes over the past years, sparked by a mix of changing customer needs, regulatory action, technology and innovation, and increased competition.
In coming years the banking industry will continue to face multiple – and sometimes opposing – challenges in providing payments services: the full deployment of instant payments and the call by regulators to create pan-European payment solutions based on instant payments; the ongoing transformation of the payments market with competition from new players; accelerated digitalisation coupled with its impact on specific customer segments; reaping the full benefits of PSD2 and the application of data economy principles in banking and payments; the constantly evolving requirements on anti-terrorist financing and anti-money laundering activities and the potential that stablecoins/central-bank issued digital currencies could have on the payments market.
The European banking industry shares the view of the strategic value of the payments market and the urgent need for action
European decision-makers have underlined payments as an area of political importance that is expected to contribute to strengthening the international role of the euro and improving the sovereignty of Europe vis-à-vis global competitors. We share the view of the strategic value of the payments market and the urgent need for action. This action however needs a coherent strategy on an Integrated EU Payments Market.
We consider that the following aspects are essential parts of such strategy to ensure the success of the European Union in the area of payments:
Instant payments are the basis: there is a need to promote a European payment initiative that is globally recognised and that allows for both the differentiation of EU companies and the reduction of dependency on a small number of dominant providers. This move requires full alignment of industry efforts with full support from EU authorities underpinned by a clear business model. The industry is committed to delivering the basic underlying infrastructure for instant payments as a basis for innovative payment solutions taking into account the new challenges for control and quality checks that the immediate execution of payments brings along.
Reaping the full benefits of PSD2 and beyond: 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. It is important that financial services are not considered in isolation and that data sharing is not limited to financial services. Payment aspects beyond PSD2 should be developed through a coordinated market-driven initiative establishing a SEPA API access scheme.
Balancing digitalisation and inclusion: The banking industry is keen to innovate in the digital space in order to meet evolving end-user needs but also to serve all customers irrespective of their digital abilities to ensure financial inclusion. It is important that banks are able to innovate and compete with other (non-bank, fully digital) players on an equal footing. Banks still assume responsibility on some societally important functions such as cash provision, deposit accounts and payment accounts availability among others. This calls for a debate about how to balance the costs of those functions with the need to ensure inclusion and access.
Digital Currencies: we support the EU in trying to define a common approach on cryptoassets and digital currencies while preserving the stability and integrity of our financial system. Any initiatives from central banks should be carefully considered and discussed with the industry.
A stable regulatory environment: Payment services in the EU are highly regulated. The current regulatory framework guarantees adequate customer protection, promotes competition and innovation and provides a coherent EU single market for payments. Regulators should balance their choices and initiatives when requiring investments from the banking industry. They must carefully consider and prioritise regulatory interventions, taking into consideration the need to support European competitiveness.
The industry is faced with considerable challenges on the road to superior European payment solutions. With a view to contributing to development of a coherent EU strategy for retail payments we will elaborate on these challenges, on how banking regulators and banks should address them together and include some considerations on what consequently should be the regulatory priorities in payments for the new Commission.
>> See entire policy paper (.pdf)