In recent years, the issue of European sovereignty in the payments market, long considered a purely political issue, has taken on an increasingly operational dimension. Developments in the payments market arena - and particularly the ambitions of internet players - geopolitical uncertainties, and changes in usage patterns have all led to this issue becoming more prominent in the minds of stakeholders in the ecosystem.
TRUSTECH Payment Roundtable with several speakers including Andrea TOUCINHO speaking in front of attendees

How can Europe’s autonomy in payments be strengthened? This is one of the recurring questions in an ecosystem characterised by profound changes in usage and developments among existing market stakeholders. So, from being a market historically dominated by banks, the payments sector is increasingly opening up to banks, fintechs and internet players who are using their abundant creativity to bring ever more secure and innovative solutions to the end customer.

Another major trend is regulatory change, which is currently characterised by the coexistence of various pieces of legislation with significant operational implications for existing stakeholders, namely the Payment Services Directive - currently in its second phase, with a third in the pipeline - the European regulation on the protection of personal data, the fight against money laundering and terrorist financing, and instant payment legislation, which aims to accelerate the development of this means of payment as the ‘new normal’ in Europe.

So, where does the issue of European sovereignty regarding payments fit in?

 

Operational issues

Payment sovereignty remains an operational issue despite legislative efforts to address it. This is due to a common regulatory base and a long-term vision on the part of European institutions that aligns with political issues and the field. We must also remember that although the post-SEPA context is marked by the development of national payment methods to European standards (credit transfer, direct debit) and the creation of new, essentially pan-European tools (instant payment, request-to-pay), the fact remains that the payment card is still a very real geostrategic issue. This means of payment, which is very popular in many European countries (including France) for both online and proximity transactions, is characterised in Europe by the coexistence of domestic schemes with a strong presence in certain countries (CB in France, Multibanco in Portugal, Bancomat in Italy, etc.) and international schemes (Visa, Mastercard, etc.), which raise both strategic and economic issues (exchange fees, etc.). This situation may be a cause for concern in an unstable geopolitical context. This is one of the main reasons why, in recent years, the issue of European sovereignty in the matter of payments has gathered significant operational momentum. The launch of the European Payments Initiative (EPI) in 2020 is proof of this growing awareness among the stakeholders in the field.

 

Market initiatives

EPI is an initiative aimed at providing Europe with a truly regional payment infrastructure. It was launched by a number of banks in various European countries, including France, Germany and the Benelux countries. The aim is to create a wallet called Wero based on account-to-account transactions and the creation of value-added services.

Among the use cases identified are P2P/P2Pro, which should see the light of day in 2024, remote payment, and proximity payment. The main issues raised by this project to date are the integration of other stakeholders in the ecosystem - EPI was conceived as an initiative of European banks - and the expansion to other European countries. It is worth remembering that France, Germany, and the Benelux countries are not the only countries looking at the issue of sovereignty from an operational point of view. Northern European countries experienced the benefits of collaboration for a number of years, as demonstrated by the P27 initiative. As for the countries of southern Europe, on the strength of the success of their national wallets, Portugal, Spain, and Italy signed a letter of intent in December 2023 to work on the interoperability of their respective mobile payment solutions; in this instance, MB Way (Portugal), Bizum (Spain) and Bancomat Pay (Italy).

All of which confirms that the issue of European sovereignty in the area of payments will take on a decidedly operational aspect in 2024. And let’s not forget the European public initiative, the digital euro project, currently being worked on by the European Central Bank (ECB), one of the main foundations of which is also the subject of strengthening European autonomy in payments. More forward-looking than the initiatives mentioned above, the digital euro project, which has recently moved from an investigation to a preparation phase, should also see further developments in 2024 - 2025.

If you want to learn more about this topic, please attend the “European payments: what strategies in terms of sovereignty?” session at TRUSTECH 2024.

 

Written by Andréa TOUCINHO, Director of studies, prospective and training, Partelya Consulting.

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