Card payments are the most important electronic retail payments in Europe, representing nearly half of the cashless transactions in the EU*. In some European countries, like the Nordics, card payments have reached even higher market penetration yet they are struggling to have such an impact in others. We now see evidence that the introduction of contactless capabilities at the point of interaction (POI) can help change this. For example, in some European countries (e.g. Czech Republic, Hungary, Poland, Slovakia) the introduction of a broad contactless infrastructure has enabled Payment Service Providers () to gain momentum in significantly growing the number of card transactions.
Therefore, mobile and card-based contactless proximity payments are an area of focus for the Euro Retail Payments Board ( - a high-level body chaired by the European Central Bank, bringing together the supply and demand sides of the industry to address strategic retail payments issues). A report on this topic, with recommendations to various stakeholders, was prepared by a dedicated working group, and published at the end of 2015, after the ’s approval. The European Payments Council () contributed significantly to this report and prepared inputs through a dedicated mirroring task force. Six months after the report’s publication, it is worth recalling its key findings and providing an update on some of the report’s recommendations involving the .
The ’s report outlined the fragmentation of the contactless market in Europe
The working group made an analysis of the current market for contactless proximity payments through a dedicated survey. The survey results (an overview is provided in the report), highlighted that the European market is fragmented in terms of maturity of the contactless card solutions adoption and the related technical standards implementations. Likewise, the mobile proximity payments environment shows strong complexities, mainly related to the usage of different technologies and the large number of business stakeholders involved in the mobile ecosystem.
The ’s vision of contactless payments
Based on the outcome of this market analysis, the following vision was proposed by the working group and subsequently adopted by the to improve contactless proximity payments:
“To ensure over time, across Europe, a secure, convenient, consistent, efficient and trusted payment experience for the customer (consumer and merchant) for retail transactions at the Point of Interaction (POI), based on commonly accepted and standardised contactless and other proximity payment technologies.”
This vision was based on the following guiding principles:
- Technical interoperability of contactless and other proximity transactions across Europe (based on common technical, functional and security standards and certification / evaluation framework) both for consumer devices (cards, mobile devices, wearables etc…) and at POIs;
- Wide availability and usability of appropriate POI equipment and consumer devices;
- Appropriate security and privacy to build up and maintain trust.
This should lead to an enhanced payment experience - faster check out, user-friendliness, better integration of value added services with payment - and to cost-effectiveness for society.
The ’s recommendations for achieving standardised contactless and proximity payments
From the survey, the working group identified the barriers and gaps which need to be addressed for the vision to become a reality. It further developed specific recommendations for the various stakeholders in the ecosystem, including card schemes, , mobile device manufacturers, a number of standards and industry bodies (such as the Cards Stakeholders Group (CSG - a multi-stakeholder body gathering retailers, vendors, processors, card schemes), the , EuroCommerce, EMVCo, the European Telecommunications Standards Institute (ETSI), and the GSM Association (GSMA)), and the European Commission.
The recommendations, which were endorsed by the , mainly focus on technical and security standardisation aspects, regulatory issues, customer guidelines and communication. The implementation time frame for these recommendations runs until December 2017, but it is expected that the will give a first status report on these recommendations at its upcoming meeting in June 2016.
Highlights on these recommendations:
- EMVCo to speed up the creation of a single common POI kernel specification for contactless payments as part of the Next Generation specifications and to make these specifications publicly available as soon as possible in order to streamline the standards used in the industry.
- ETSI to develop a generic secure platform for the mobile device and the complementary processes which should contribute to the cost-effectiveness with respect to the development, certification and implementation of mobile proximity payment services.
- The European Commission, Regulators and the CSG to work together to ensure a consistent understanding of ‘the choice of application’ in the Interchange Fee Regulation and to address the potential impact it could have on the take-up of contactless payments.
The ’s response to some of the ’s recommendations
The has been closely involved in the follow-up on some of these recommendations.
- During the past few months the CSG has worked on minimum requirements, a description of use cases and common implementation guidelines for card and mobile-based contactless payments and has worked with the European Commission on implementing guidelines for the ‘choice of application’.
- In order to enhance society awareness on contactless payments, the is also contributing to the development of a consumer leaflet and a retailer’s guide on contactless payments together with the consumer organisation BEUC, the retailer’s association EuroCommerce and the ECB.
It is expected that, by December 2017, the implementation of these recommendations will create the essential conditions in the cooperative space towards harmonisation and a more uniform customer experience for contactless proximity payments. These actions will facilitate the further development of contactless payments across Europe thereby reducing the use of less effective means of payment like cash and cheques.
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