- National schemes Bizum and iDEAL open to collaboration
- Interoperability considered a key challenge for EPI
Domestic payment schemes have been a success story in the Netherlands, Spain and Germany, but they see opportunities in becoming part of the pan-EU payment initiative.
National payment schemes are open to participating in the European Payments Initiative (EPI) — a project currently being developed by EU banks in an attempt to increase payments sovereignty in the trading bloc.
Two national payment schemes, the Netherlands’ iDEAL and Spain’s Bizum have told VIXIO that they see the project as an opportunity.
“If EPI is a scheme that could cover all of the European markets, that is great. We would be happy to co-badge, merge or fold into the EPI,” said Fernando Rodríguez Ferrer, business development director at Bizum.
Bizum, a joint project of the Spanish banking sector with 11.8m active users, has a model that could be replicated at EU level, opening up the opportunity for possible collaboration in the future, said Rodríguez Ferrer. “This will mean building in an interoperable solution.”
“Some of our banks have signed up to the EPI, and when taking into account our infrastructure, we’re happy to include other European accounts,” he said, stating that users do not necessarily need a Spanish mobile phone number for the number-based instant payments scheme.
However, merging 12 or so domestic schemes in the EU could be challenging, he acknowledged. “Specifically for P2P [peer to peer] since identification with the brand is higher so keeping the basic functionalities and communication are key to achieve it,” he said.
iDEAL, which already allows Dutch users to use it cross-border within the EU as a result of a partnership with open banking platform Trustly, was also upbeat about the possibility of collaboration. “We feel that with good interoperability standards all the major pan-European online banking e-payments schemes could fuse into a very successful pan-European solution, as part of EPI,” a spokesperson for the company said.
This is good news for the EPI — one of its aims is to bundle the current transactions volumes in domestic schemes.
The national card schemes interest in the EPI comes as the project continues to make progress. In late 2020 it established an interim company and announced the appointment of Martina Weimert as chief executive.
In addition, the company has confirmed that a proof of concept will be released in the third quarter of 2021, with the launch of the overall solution in the market and migration management to take place the following year alongside issuance of the cards.
The project enjoys full backing of the European Commission, which referred to it in the EU Retail Payments Strategy last year.
“If it succeeds in uniting Europe’s banks, then it would provide a pan-EU payments system and unite the EU payments market, which is why there is so much political support,” said Victor Warhem, France-based economist at the Centre for European Policy Network.
Like Visa and Mastercard, it could eventually be something that is known and used everywhere, he suggested. “However, it will take at least a decade until this is a reality.”
The momentum surrounding the EPI’s opportunities has not been able to quell scepticism from payments experts, considering issues such as interoperability.
“Payment habits vary in different EU markets. Fewer people use the banking system to pay in Italy for example, and there is a large use of cheques in France,” said Warhem.
“Every market has its peculiarities so how do you make a product that will satisfy all users of 20 banks and their customers?” he asked, stating that this is a problem for the supply side.
This has already been a concern, with one source telling VIXIO: “EPI is fine, as long as it doesn’t replace iDEAL with a less efficient pan-EU scheme.”
“It is already hard enough to coordinate the interests of the banks in a national context, so will be challenging for 27 countries,” said Hugo Godschalk, managing director at PaySys Consultancy. “If it is driven by regulators, then I have doubts about its success.”
This project is driven by the European Central Bank and politicians are using regulation to put pressure on the market to set up the system, to combat the international schemes’ dominance, he argued.
“However, at present, the market share for domestic payments is 50/50 between the international card schemes and domestic card payment methods. This is a competitive, healthy and well-functioning market,” Godschalk said, referring to research conducted by PaySys.
It is cross-border payments where there is an opportunity due to the duopoly at present between Visa and Mastercard, he explained. “This is where we see possibilities, but only 10 percent of card payment transactions are cross-border,” he said.
“As this will cost billions to set up, I am sceptical, particularly as this is only a duopoly for cross-border payments at the physical point of sale terminals,” he added, explaining that this is not an issue for cross-border remote payments in e-commerce.
The EPI will take billions of investment, Godschalk said. “I doubt that the banks are willing and able to invest these amounts,” he speculated, adding that it is difficult to understand where they see a positive case for this.