.svg)
- EPI brings new banks on board in big win for the project
- Pan-European digital wallet pilot set for end-2023
The European Payments Initiative (EPI), a project to build a pan-European rival to Visa and Mastercard, rises from the ashes with two big announcements: the acquisitions of Dutch payments champion iDEAL and a new pilot by year end.
On Tuesday (April 25), the EPI announced the acquisition of iDEAL, the leading Dutch online payment scheme, and Luxembourg-based payment solutions provider Payconiq.
The announcement comes a year after nearly two thirds of EPI member banks quit the pan-European payments project. Speaking at the time, one bank told VIXIO that it had lost faith in the prospects to develop the initiative.
Without revealing details, the EPI responded by scaling down the scope of the project and announcing that its objectives would be tailored to the limited number of participants that “remain convinced of the strategic value of a unified payment solution” across Europe.
The acquisition of iDEAL, a major success story in the Dutch payments landscape, and Bancontact Payconfiq, the tech platform it currently runs on, represents a significant coup for EPI and suggests the project is firmly back-on-track.
Martina Weimert, CEO of the EPI, said the deal will help all parties involved to realise the EPI’s vision to build an innovative solution “in the best possible way, with efficient, state-of-the-art technology”.
“EPI will leverage the strong operational experience, know-how and local market knowledge of these companies,” Weimert added.
The EPI’s move to buy iDEAL and Payconiq did not come as a surprise to some payment experts.
“Given there are many different solutions across Europe, it makes sense for EPI to try to consolidate some of them,” Zach Meyers, senior research fellow at the Centre for European Reform, told VIXIO.
“If your stated objective is to create a pan-European payment system and interbank network to compete with Mastercard and Visa, then buying one of the oldest and most successful pay-by-bank services, iDEAL, along with one of the best technical platforms, Payconiq, is not a bad place to start,” said Joss Wilbraham, head of networks and infrastructure at Form3.
iDEAL was launched by Dutch big banks ABN Amro, ING, Postbank and Rabobank in 2005 to fill a significant market gap. At the time, Dutch consumers could not use their local debit card to shop online.
Earlier this week, the company told local newspapers that it processes roughly 70 percent of all e-commerce transactions in the Netherlands, representing more than 1.2bn payments a year.
Another payment expert told VIXIO, “anyone can build a payments app but the challenge is adoption”.
“EPI has now bought market share by acquiring a brand that is not only hugely successful in its native Netherlands but is also highly regarded by the industry outside of it. Game on.”
New and old members sign on
Along with the acquisition, the EPI also announced that four new shareholders had joined its ranks: Dutch banks ABN Amro and Rabobank, German DZ Bank and Belgian-based Belfius.
They are joining the EPI’s existing shareholders BFCM, BNP Paribas, BPCE, Crédit Agricole, Deutsche Bank, DSGV, ING, KBC, La Banque Postale, Nexi, Société Générale and Worldline.
The re-joining of DZ Bank sends a strong message to market participants, said Kjeld Herreman, a consultant at RedCompass Labs, who reiterated that it was the departure of DZ Bank last February which started the domino effect that led to many of the German banks pulling the plug.
Getting Belfius on board is also a significant win, according to Herreman.
Belgium’s big four banks — BNP, KBC, Belfius and ING — together control 80 percent of the market in Belgium.
With BNP, KBC and ING already on board, adding Belfius secures a strong place for the EPI digital wallet in terms of market adoption.
All-in-one digital wallet across Europe
The EPI has also announced that it is planning to launch its long-awaited digital wallet with P2P functionality in a pilot phase by the end of 2023.
The pilot will initially take place in France and Germany, followed by a broader market launch in Belgium, France and Germany in early 2024. The EPI noted that these markets together represent more than half of all non-cash payments in the eurozone.
The EPI product will be “a multi-faceted digital wallet solution and an instant, account-to-account payment means under one brand, unified across European countries”, the announcement says.
The company will initially enable person-to-person (P2P) and person-to-professional (P2Pro) payments, followed by online and mobile shopping payments and later point-of-sale payments.
It will support a comprehensive range of transaction types including one-off payments, subscriptions, instalments, payments upon delivery and reservations.
Over time, it will add further value-added services such as buy now, pay later (BNPL), digital identity features and integration of merchant loyalty programmes.
The digital wallet will be offered both as a standalone app and as one that is built into banks’ apps, the EPI spokesperson told VIXIO.
Starting with P2P payments is “a smart move”, according to the payments expert, as it “doesn’t step on anyone’s toes” and can help to build scale.
However, experts agree that there are still massive challenges that the EPI must overcome if it wants to achieve its ultimate objective of competing with card payments at point-of-sale and building merchant acceptance is only one of them.
Meyers emphasises that most banks, including the EPI’s shareholders, earn huge fees from card payments and have limited incentives to encourage consumers to move towards a less-lucrative solution.
“It is always hard to see how EPI can keep up with international payment operators in terms of innovation.”
“If it is cheaper, there will be less profits to reinvest in innovation,” Meyers said.
“As a consortium-led payment system, it will be harder to get agreement on rolling out new innovations, compared to the international card schemes which can orchestrate the rollout of new services and force all banks to adopt them,” according to Meyers.
It is a question of whether banks can convince their consumers to change their payment habits, according to Wilbraham.
He argues that the EPI can secure adoption by consumers if it provides a faster, more secure and more convenient way to pay than cards, but “when it comes to making returns and complaints, Visa and Mastercard have set a high bar”.
According to Herreman, however, the EPI will likely incorporate these types of dispute resolution protections in its digital wallet to compete with card payments.
