The European Commission (the Commission) stated that by summer 2012 it will determine the need for European Union (EU) action to address ‘gaps' it perceives with regard to competition, choice and innovation in the area of card, mobile and internet payments. The does not support a number of related assumptions and suggestions put forth in the Commission's Green Paper ‘Towards an integrated European market for card, internet and mobile payments', published for consultation in January 2012. Consequently, the EPC believes that many of those suggestions will not help achieve the objectives stated in the Green Paper and may even undermine their realisation. The detailed response of the EPC to the 32 questions tabled by the Commission with the Green Paper is set out at the end of this blog.
A thorough factual analysis of the EU payment landscape is a prerequisite for any conclusion that further regulatory action may be required. This analysis should recognise the following market realities: Europe is not a fully integrated market in terms of economic development, cultural background, customer preferences or regulatory framework. Europe and its payment markets cannot be considered in isolation as they are part of an increasingly integrated global economy.
The EPC's response to the Green Paper outlines the following key policy considerations which, in the view of the EPC, should be observed when determining the need for EU action impacting card, mobile and internet payments:
- The societal cost of cash and the societal benefit of migration to electronic payments are largely ignored by the Green Paper, whereas the active promotion of non-cash means of payment would significantly contribute to the achievement of the objectives pursued by the Green Paper.
- Regulatory intervention should not undermine the innovative capacity of the European payment sector and its competitiveness in the global marketplace.
- Regulation risks stifling innovation and market participant-led standardisation initiatives.
- Regulation is not suited to keeping pace with the fast evolution of technology, fraud and market developments. As a matter of principle, any regulatory action should be technology-neutral.
- Ensuring a level playing field for all players active in the European marketplace from a competitive, regulatory and supervisory perspective must be a public policy priority.
- Payments should be run as a business in a market economy.
- Legal clarity and certainty at EU level is a critical prerequisite for creating a stable and predictable Single Euro Payments Area () wide environment for investments in new payment initiatives and innovation - e.g. interchange fees.
- Integrity and customer trust are key in payments and should not be compromised.
- End-user interests should be properly balanced with a particular focus on ensuring tangible benefits for consumers.
- Any regulatory initiative should be supported by a thorough impact assessment and subject to a comprehensive public consultation and appropriate implementation schedules.
The EPC regrets that the Green Paper seems to overlook major market achievements to date to progress SEPA, e.g. development and launch of SEPA Credit Transfer and SEPA Direct Debit Schemes, publication of the SEPA Cards Framework and the SEPA Cards Standardisation Volume - Book of Requirements. Migration to EMV chip for face-to-face card transactions is nearly completed. More generally, the market is witnessing a spectacular growth in card transactions and contributions to the development of an integrated mobile payment ecosystem.
Contrary to the Commission's assumption propagated with the Green Paper, payments do not act as a main barrier to the development of e-commerce otherwise e-commerce would not have experienced continuous fast growth as evidenced by several market studies. This market is, and has been, growing with double digit growth rates continuously. This is not least because of the provision of many well accepted payment solutions by payment service providers in general (card payment on the internet, online banking based payment solutions, wallet solutions, etc.). The ‘Consumer market study on the functioning of e-commerce and internet marketing and selling techniques in the retail of goods', prepared on behalf of the Executive Agency for Health and Consumers (EAHC) (see link below), lists consumers' greatest concerns about buying products online from another EU country. The study finds that none of the top five concerns relate to payments. The EAHC performs the tasks and activities entrusted to it by the Commission, and it works closely with the Commission's Directorate General (DG) Health and Consumers. The report ‘European Cross-border E-commerce - The Challenge of Achieving Profitable Growth' (Accenture; see link below), reveals that fragmentation of payment systems does not rank within the top 15 issues having an impact on EU cross-border online trading.
The position paper on ‘Online Payments in Europe', published in June 2011 by the e-Payments Merchant Initiative (see link below), highlights the fast development of e-commerce in Europe. This position paper states: "In the past 15 years e-commerce has become a mature market and is still growing. This trend is expected to continue in the coming years due to the further proliferation of mobile devices (smartphones, tablets) and the customer need of ‘being always online'. Following this market success, e-commerce payments have become a major challenge in the past decade. The vibrancy and innovation of payments is resultant from imperfections in the European payments landscape. These imperfections bring opportunity to create new more efficient methods to consumers and merchants. Many positive developments have taken place to optimise payments for the web. Innovation has seen traditional payment methods come under pressure as consumers and merchants migrate to more convenient and efficient and secure payment methods." The e-Payment Merchant Initiative concludes: "Allowing free market forces, to drive the evolution in the European payments landscape is the best possible way of moving to a more perfect model."
The question now is whether the Commission will actually consider the feedback from market participants as well as valid research when determining whether there would be a need for further EU action in the area of card, internet and mobile payments.
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