ECB board member: „In Europe, it is expected that non-banks will have a stronger role in payment markets in the years to come”

This is what Yves Mersch (photo), member of the Executive Board of the ECB, says in a speech at Belgian Financial Forum organised by the National Bank of Belgium. He is wonder why an electronic payment still take a full day at least and strongly believes that „instant payments will be the new normal”.

Highlihgts of the speech:

„The technical standardisation of payment cards may contribute to more competitive card acquiring, i.e. the processing of card payments on behalf of the merchant. In the longer term, this may lead to significantly lower costs for handling card terminals and accepting cards, especially for small merchants. „

„With regard to innovation, the European Commission roadmap recognises that the current trend of digitalisation in retail payment services – i.e. the development of new models and approaches through technology and the internet – provides a particular opportunity to further integrate markets and solve a number of pending issues in the retail payments sector.”

„While in some European countries, for example in the Netherlands, banks began offering these payment initiation services, in other countries, such as Germany, new providers entered the market. Legally, these third party service providers have been operating in a grey zone. At the same time, their emergence demonstrates that an actual market need was not being covered sufficiently by the traditional market.”

„The need for a level playing field on which to compete goes both ways. All entities providing retail payment services to end-users within the EU should be licensed and supervised. The licensing of third party service providers needs to be proportionate, as is currently the case for banks, for e-money institutions and for payment institutions.”

„It is encouraging to see that the market is pro-active in taking up the requirements of Payment Services Directive 2. For instance, some existing retail payment processors see a role for themselves in facilitating payment initiation services, thereby assisting banks and third-party service providers in supplying them to end-users and making them a more valuable service proposal. Some banks are changing their strategies to become active as third party service providers or even to set up special purpose subsidiaries. These subsidiaries will provide their parent bank’s services bundled with the services offered by competing banks, making the increased competition really work for the benefit of payment service users – be it consumers or merchants.”

„… in the digital era, it is incomprehensible why e-payments should take longer than e-mails. People expect instant payments to be as self-evident as other services delivered via the internet, e.g. instant messages, movie streaming or Instagram. Nobody would accept an e-mail being delivered with the same time lag of a letter sent by surface mail. Why then does an electronic payment still take a full day at least?”

„You may ask why we need a common scheme for instant payments. After all, innovative payment services based on instant payments are already being implemented by some national communities in Europe. However, even if they are often based on the same technical standards, these services lack common rules and the harmonised implementation of standards and are therefore not easily interoperable. This means that, for example, a service deployed in Germany cannot be easily used in France. What we want is for electronic payment means to work for you wherever you are, whether you are paying by card, online, or using your smartphone.”

„In the discussion on innovation in retail payments, instant payments are what everyone is talking about. Payment service providers will build their service offers around instant payments, for example when you use their services to shop online or to pay a friend via your mobile phone. This will foster competition between providers, benefitting the end user.”

„Of course, when instant payments become a reality, this does not mean that other non-instant payments will die out. We have seen that, besides e-mails, online news services and Instagram, there are still letters sent via postal services, people reading newspapers, and photos put into albums. However, instant payments will be the “new normal”.

To read the full speach follow the link: Challenges of retail payments innovation