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  • Thierry Spanjaard

The European payment scheme is key to our sovereignty

In a world that is increasingly divided in blocks and when the balance of the world in the four next years is dependent on next week decision of a handful of voters in a few remote US states, the European Commission is reaffirming its will for more European-level sovereignty.

Consequently, European authorities on all levels are progressing in setting up European sovereignty tools to make us less dependent on the other two major blocks. MoneyFest, the online edition of Money20/20 has dedicated a few sessions to the evolution of payments in Europe.

Ulrich Brindseil, Director General of the European Central Bank’s Directorate General Market Infrastructure and Payments, strongly advocates for more European payment integration. He points out that, in Europe, two thirds of card payments are still executed by the two largest world payment schemes while the rest goes through national schemes; however, most payments at point of sales in Europe are still cash-based leaving room for growth for electronic payment means.

The existence of SEPA and the finalization of Instant Payments since 2018 is paving the way to the next step: the creation of a pan-European payment scheme, something that was already envisioned under the term of “SEPA for cards” a few years ago. The ECB has set up a set of conditions for such a scheme:

· Pan-European reach and customer experience,

· Convenient and cost-efficient: at least as easy and at most as costly as existing payment schemes,

· Safe and secure,

· Compliant with the whole European regulatory framework, including consumer and merchant protection,

· European governance, while remaining open to all players: banks, merchants, …

And in the long term, the European card scheme should have a global recognition and acceptance.

EPI, the European Payment Initiative solution, was announced earlier this year by 16 banks from 5 countries, to provide a point of sales solution, an eCommerce solution and person to person payments. The project was instantly supported by the ECB. The European Payment Initiative (EPI) will be based on Instant Payments, for which the ECB already operates the TIPS (TARGET Instant Payment Settlement) platform for clearing and settlement.

The emergence of EPI along with the ECB’s will to set up a pan-European payment scheme is an answer to demands by all those concerned by sovereignty, and especially a healthy reaction to the current dependence of European transactions on US-based payment schemes. It will also be an opportunity for European financial institutions to improve their control on their customer relationship and to ensure that all data linked with payments will remain under European control. The project is also expected to trigger more competition, and at the end of the day be profitable to consumers and merchants, says Ulrich Brindseil.

In another MoneyFest session, Mark Barnett, the President of Mastercard Europe, when questioned about EPI, answered: “we welcome any form of increased competition in payment, as it brings more choices for consumers and businesses” and even proposed MasterCard’s help and partnership. Of course, everyone understands the underlying message: MasterCard, and supposedly Visa is on the same line, is not ready to let European financial institutions become more independent and even less to let them build a new competitor without reacting.

The next few years will show if the European authorities and the European financial institutions will be able to resist the already strong influence coming from across the Atlantic Ocean. In other words: when shall we actually see the pan-European scheme and to which extent will it be independent?

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