Issue 28 - October 2015
Regulation and Market Trends Shaping the Future of Payments in Europe and Beyond
In this Newsletter, the European Payments Council (EPC) recalls that it was invited by the Euro Retail Payments Board (ERPB), at its June meeting, “to present to the ERPB by November 2015, a proposal for the design of an instant SEPA Credit Transfer (SCT) scheme in euro, which could be adhered to by European Union payment service providers on a voluntary basis.”
Following this invitation, the EPC has, since the summer, been working on the design of an SCT instant scheme, under the guidance of an ERPB High Level Group on instant payments, and with the involvement of other stakeholders.
The EPC has also recently announced that it is holding (at the ERPB’s request) a free of charge stakeholders workshop focused on Person-to-Person mobile payments on 10 December 2015.
In his article, Javier Santamaría, Chair of the EPC, outlines the progress of the EPC in relation to the various recommendations made by the ERPB. The article focuses on the SCT instant payment scheme, Person-to-Person mobile payments and the evolution of existing schemes. The EPC is committed to responding to these expectations, whilst ensuring that a multi-stakeholder process is adhered to at every stage.
This edition of the EPC Newsletter also covers the following topics:
- The impact of the Interchange Fee Regulation (IFR), which was adopted in April 2015, from the perspective of a card scheme, a banker and a processor:
- Marc Temmerman from Visa Europe offers the card schemes’ perspective, focusing on the commercial implications, as well as pointing out some critical issues that the Regulation creates.
- Alan Ainsworth from Barclays’s gives the view of a banker, outlining two reasons why regulatory changes could speed up, rather than de-rail, emerging payment trends. The article examines payment trends and assesses the impact of IFR on the broader payments industry.
- Ulrich Engelhart, from Worldline, provides the processors’ point of view, as well as Worldline’s vision of the long-term implications of the IFR for processors.
- In addition, the EPC Newsletter examines the impact of competition law enforcement on the European payments industry with a piece from Johan Ysewyn and Anne Robert from the law firm, Covington.
- Fred Bär, Secretary General of the European Automated Clearing House Association, reviews current industry developments regarding instant payment offerings and initiatives from the perspective of Automated Clearing Houses.
- Elizabeth McQuerry from the International Payments Framework Association also talks about instant payments in her contribution. She explains how this collaborative industry initiative, meant to simplify the exchange of cross-border payments, is evolving to support industry needs.
Last but not least, Jean-Yves Jacquelin, Chair of the EPC Scheme Evolution and Maintenance Working Group, discusses the various meetings and consultations concerning the existing EPC schemes that are currently in progress and their potential impact. This includes updates on the first meetings of two new stakeholder bodies, the EPC Scheme End-User Forum and the EPC Scheme Technical Forum, the consultation on the Scheme Management Internal Rules, which runs until 31 December 2015, and the EPC SEPA scheme rulebooks which are also open to suggestions for changes until 31 December 2015.
Please recommend the quarterly EPC Newsletter to your colleagues – a free subscription can be obtained by clicking here.
EPC Latest News
EPC and Euro Retail Payments Board Driving Innovation in PaymentsEPC progresses recommendations from Euro Retail Payments Board
28.10.15 BY Javier Santamaría
The Euro Retail Payments Board (ERPB), a high-level body chaired by the European Central Bank, has outlined various recommendations to the European Payments Council (EPC) in relation to instant payments, Person-to-Person (P2P) mobile payments and the existing SEPA schemes, since its launch in December 2013. During the June 2015 meeting of the ERPB, the EPC presented a report outlining its views on instant payments, as well as three conditions which must be met in its opinion before any further steps can be taken. As a result of this presentation, the EPC is preparing a proposal for the design of a SEPA Credit Transfer (SCT) instant payment scheme in euro.
In addition, in response to the report provided by the ERPB working group on P2P mobile payments, the members of the ERPB also agreed “to endorse the vision of allowing any person to initiate a pan-European P2P mobile payment safely and securely, using a simple method with information the counterparty is prepared to share in order to make a payment.”
In this article, Javier Santamaría, Chair of the EPC, outlines the progress of the EPC in relation to these various recommendations made by the ERPB. The article focuses on the SEPA SCT instant payment scheme, P2P mobile payments and the evolution of existing schemes. The EPC is committed to responding to these expectations whilst ensuring that a multi-stakeholder process is adhered to at every stage.Read more
Opinion and Editorial
The Impact of the Interchange Fee Regulation: a Card Scheme´s ViewDealing with the new normal and abnormal
28.10.15 BY Marc Temmerman
European payments are being hit by several disruptive forces, including heightened levels of innovation, competition and regulation. One of the more significant changes is the European Union Regulation on Interchange Fees for card based transactions, also known as the IFR. This article will not describe what is in the Regulation as plenty of literature on the topic is widely available. Instead, it will focus on the commercial implications as well as pointing out some critical issues that it creates. In this article, Marc Temmerman, Director European Affairs at Visa Europe, outlines the impact the IFR will have on card issuers (who will need to re-assess their card portfolios) and acquirers (the IFR will lead to a broader acceptance of credit cards, especially in areas where acceptance had been limited so far). He also focuses on the issues card schemes will need to deal with, raised for instance by the IFR definitions of ‘commercial cards’ and ‘cross-border payment’. The views expressed in this article are solely those of the author and should not be attributed to the European Payments Council.Read more
Opinion and Editorial
Regulation on Card Fees for EU-Wide Payments: a Processor´s ViewWorldline´s vision on the impact of the capped interchange fees
28.10.15 BY Ulrich Engelhart
Last April, the European Parliament and the Council of the European Union adopted a new Interchange Fee Regulation (IFR) capping interchange fees for payments made with debit and credit cards. While the main goal is to create a harmonised Europe-wide payments market, this Regulation also aims to help cardholders make informed decisions when it comes to their payment methods. Additionally, it will contribute to cost reductions for consumers and retailers, and encourage competition for a broader availability of payment methods. This also means that acquirers and issuers will take this opportunity to develop or modify their customer offers by adding attractive value added services. This will, therefore, impact processing as it will need to adapt and support the new fee models and associated business rules and to provide extended offerings with innovative services. Hence all stakeholders and, in particular, the processors will be challenged on their capacities and capabilities to operate with pan-European reach. In this article, Ulrich Engelhart, Worldline’s Head of Payment and Industry Analyst Relations, outlines Worldline’s vision on the long term implications of the IFR for processors. The views expressed in this article are solely those of the author and should not be attributed to the European Payments Council.Read more
Opinion and Editorial
IPFA 2.0 – How the International Payments Framework Association is Responding to Industry DevelopmentsCross-border payments are being redefined by industry forces. The IPFA is evolving to help the industry bring together the need for instant payments and flexibility.
28.10.15 BY Elizabeth McQuerry
A collaborative industry initiative to simplify the exchange of cross-border payments, the International Payments Framework Association (IPFA) is evolving to support industry needs. The IPFA is adding instant payments as an additional service option alongside non-urgent payments. As part of this effort, the IPFA is also supporting the industry harmonisation initiative by no longer utilising its own proprietary format and adopting the new Real Time Payments Group ISO 20022 message for both instant as well as non-urgent payments. In this article, Elizabeth McQuerry, CEO of the IPFA, explains how this choice will, over time, allow IPFA participants to utilise the same ISO 20022 messages for cross-border payments that they are using for domestic implementations. New membership categories are also being added to respond to different industry needs and the desire to enable more voices to contribute to the IPFA’s initiative to define and promote best practice in cross-border payments. The views expressed in this article are solely those of the author and should not be attributed to the European Payments Council.Read more
EPC Latest News
A Fruitful Autumn for Stakeholders´ Involvement in the EPC SEPA Scheme ManagementThe EPC´s commitment for stakeholders´ involvement is front of mind with new stakeholders´ group meetings and several consultations on scheme related documents
28.10.15 BY Jean-Yves Jacquelin
The activities of the European Payments Council (EPC) from September until the end of the year highlight its commitment to involve actively all stakeholders in the evolution of its payment schemes. In line with the EPC’s new governance, approved at the end of 2014, two new groups gathering representatives of the demand side of the payments market (the EPC Scheme End-User Forum - SEUF) and technical players (the EPC Scheme Technical Forum - ESTF) met for the first time in September 2015. In addition, all payment stakeholders are currently invited to submit their comments by the end of 2015 on a set of major EPC documents, the Scheme Management Internal Rules (SMIRs) and the rulebooks of each EPC SEPA scheme. These concrete illustrations of stakeholders’ involvement aim to ensure that the EPC SEPA schemes evolve in a transparent manner, in response to proven market and end-user needs, while reflecting updates of technical standards. In this article, Jean-Yves Jacquelin, Chair of the EPC Scheme Evolution and Maintenance Working Group, discusses the various meetings and consultations that are in progress and their potential impact.Read more
Opinion and Editorial
Payments and the Effect of the Interchange Fee Regulation: a Banker´s ViewPayments are changing fast – will legislation speed this up or slow it down?
28.10.15 BY Alan Ainsworth
The ways in which we pay and are paid are changing. ApplePay has been launched in the UK, Barclays has announced that it will launch Android-based mobile payments later this year, and we expect Samsung and Android ‘Pays’ soon. ‘Omnichannel’ has moved from being a buzzword to a reality, as people buy using not just one but a variety of channels. These changes have been enabled by the rapid evolution in shopping behaviour, and the widespread adoption of smart mobile devices. While these changes have been going on, the European Union has substantially altered the regulatory environment for payments. At the heart of this has been a significant drop in debit and credit card interchange rates. In this article, Alan Ainsworth, Director of Government Relations for Barclays, outlines two reasons why these regulatory changes could speed up, rather than de-rail, these emerging payments trends. First, regulatory certainty helps the industry move forward and second, there is no longer a clear financial distinction between cards and other forms of payment that could drive investment decisions. This article will examine these payments trends, before assessing the specific impact of the Interchange Fee Regulation on the payments industry. The views expressed in this article are solely those of the author and should not be attributed to the European Payments Council or Barclays Bank PLC.Read more
Opinion and Editorial
Interoperability of European Instant Payments: How Infrastructures Can ContributeThe role of Automated Clearing Houses in a future instant payments scheme
28.10.15 BY Fred Bär
Automated Clearing Houses (ACHs) played an important role in the first wave of the European standardisation during the migration to Single Euro Payments Area (SEPA) standards in the Eurozone. Instant payments appear to be the next wave, with a special focus on the developments within the Eurozone, where currently no pan-European solution exists, few country-wide solutions are live and many initiatives to create solutions have been announced. This is in contrast to the situation outside the Eurozone, where several instant payment solutions are already live and have seen fast user adoption. There is an emerging landscape of multiple solutions over multiple geographic areas. All of these are currently confined to national reach, hence in practice, are not interoperable. At the same time, there is a call from the payments regulatory bodies for at least one single uniform scheme to serve Euro transactions in Europe. Clearing infrastructures will be looked at to play a key role in organising the clearing and settlement processing to support the instant payment solutions. The European Automated Clearing House Association (EACHA), as an industry association, acts as a forum for clearing houses to jointly address the challenges, technical and operational, of achieving interoperability. EACHA will first produce guidelines, and has an aim to evolve the guidelines in due course to a framework with standards for interoperability. In this article, Fred Bär from EACHA, reviews current industry developments in Europe regarding instant payments offerings and initiatives, from the perspective of ACHs. The views expressed in this article are solely those of the author and should not be attributed to the European Payments Council or the EACHA association.Read more
Legal and Regulatory Issues
Competition Law Enforcement in the European Payments IndustryThe fine balance between cooperation and cartel
28.10.15 BY Johan Ysewyn and Anne Robert
Over the last ten years, the payments industry has become the focus of attention of competition authorities in the European Union. One of the key concerns stems from the need of the various players in the payments industry to meet, discuss and cooperate in order to develop standards and schemes that are interactive, pro-competitive and widely available, guarantee payment security, and ultimately benefit consumers. At the same time, this need for cooperation creates a risk of, on the one hand, potential collusion between the participants, and, on the other hand, foreclosure of those companies or players who – for one reason or another - have no role in the development of the scheme. Confronted with this increased scrutiny, the payments industry has clearly stepped up its compliance efforts over the last few years in order to ensure the competition risks are minimal. In this article, Johan Ysewyn and Anne Robert from the law firm Covington provide an overview of the most significant cases competition authorities have decided to pursue in their - sometimes ill-advised - attempts to introduce more transparency and competition in the payments industry in Europe. The views expressed in this article are solely those of the authors and should not be attributed to the European Payments Council.Read more