What’s next for payments in the EU?

The past mandate has heavily contributed to shaping the future of the payment landscape in the EU. Among public affairs professionals involved in payments for more than 5 years, the fact that payments used to be a very niche topic which wasn’t a very “sexy” conference topic has become a recurring joke. Regulation around payments or impacting payments is now in the center of key debates, including, for example, the international role of the EU and the autonomy of the EU. Regulatory workstreams are converging in an attempt to develop innovative, cost-effective and consumer-centric solutions in the EU.

In 2015, the EU adopted a new directive on payment services (PSD2) to adapt rules to the new realities of the payment landscape, promote competition and the development of innovative payment solutions as well as to reinforce consumer protection (against fraud, for instance). PSD2 has been described as the advent of Open banking and innovation. ‘Open banking’ is used to describe the shift from a closed model to one in which data is shared between different members of the banking ecosystem – with consent from the customer – to encourage collaboration between established banks and fintech companies.

While the expected “revolution” and disruption of traditional models is slower than expected, there are high expectations for the development of new, innovative, consumer-centric and affordable solutions. Discussions on the technical application of PSD2, for instance, around what Application Programming Interfaces (API), used to allow access to the payment account, should look like are still ongoing in certain European groups and are likely to continue in the coming months.

More recent communications for the European Commission opened the door for further regulatory developments when it comes to innovation in the financial sector, including the FinTech action plan and the workstream on Artificial Intelligence. There is no doubt about the strategic role of data and future regulatory developments regarding access to data on the payment landscape in the coming years.

Costs of payment have also been high on the previous Commission’s agenda and will continue to be in the coming years. In 2015, the EU also adopted a Regulation on Interchange Fees which aims at – together with PSD2 – limiting transaction fees based on consumer debit and credit cards and banning retailers from imposing surcharges on customers for the use of these types of cards. The European Commission is now looking into the effect of this Regulation and is expected to release an implementation report in 2020, possibly accompanied by amendments.

In addition to the discussion on Interchange fees, the EU adopted new rules to make cross-border euro transfer cheaper and currency conversion in the EU fairer.

At the intersection of questions of innovation, evolution of consumer expectations and costs is the conversation about instant payments, which will likely be an important focus for the next European Commission. The European Commission has expressed its wish to further promote the development of European solutions, relying on tools such as SEPA Instant Credit transfer scheme or the TARGET instant payment settlement (TIPS) service.

The EU is well aware of the fact that global – non-EU – providers are tapping into the potential created by favorable infrastructure and regulatory framework, and this trend is of course reinforced by the technological superiority of other regions, for instance on AI. Further actions are therefore expected on these fronts in the coming years.