The views expressed in this article are solely those of the author and should not be attributed to the European Payments Council.
Giorgio Andreoli took up the post of Director General of the European Payments Council (EPC) on 1 April 2023. We interviewed him to shed light on his first impressions, the challenges ahead and his vision of the future for payments and digital transformation.
What challenges does the European payments landscape face today?
I have a limited background at the EPC but longer experience in innovative services and digital payments, and, of course, life-long experience as a consumer using payment services. From an outsider perspective, I can say that European payment services are, in general, very effective and efficient, and that SEPA initiatives carried out by payment service providers (PSPs) in the last 15 plus years played a major role in that, along with the efforts of card schemes, regulators and central banks. The challenges and corresponding areas of improvement are the ones consumers notice less frequently unless there is a crisis period or a serious issue. They are limited choice (and high costs, at least in some countries) for merchants in the retail payments at the Point of Interaction (POI); strategic autonomy and resilience at European level vis-à-vis potential geopolitical threats; and fraud and the inexhaustible ability of fraudsters to develop ever more sophisticated threat patterns to attack consumers, merchants and enterprises.
What are the challenges of the immediate future?
The payments system is to the economy what a well-functioning blood circulation system is to a healthy human body. That is why there is a need to update payment schemes continuously and to define new ones, keeping up to speed with the rapid evolution of technology and market demand.
A major challenge of the coming years is accommodating this accelerating evolution – exemplified by disruptive technologies such as the artificial intelligence, big data and quantum computing – with our human limitations, and with the limits of our corporate processes. Here, the potential threat is the ability of the stakeholders along the payments’ value chain to keep managing the growing complexity of payment projects and services, mitigating the risks connected with new and unexploited scenarios.
One practical example of this challenge will be the likely introduction of Central Bank Digital Currencies (CBDCs), which will indeed test the capacity of the PSP ecosystem to cope with complex, large-scale transformative programmes and new risk scenarios. A further no-less-important challenge will be our ability to improve the inclusiveness of payment services – including access to cash – for vulnerable portions of the population.
What is your opinion on the digital transformation of payments today?
My first consideration when talking about digital transformation is that consumers, merchants and enterprises nowadays take for granted the immediate, easy-to-use, ubiquitous and gratifying user experience of digital services and expect the same characteristics from all services they use in everyday life, including payments.
This means that payment services need to complete their evolution as ‘instant’, mobile and easy-to-use services and at the same time secure protection for end-users against frauds, security threats and a misuse of personal data – all of which are key elements in guaranteeing the stability and integrity of payment systems. It’s evident that there’s a tight trade-off between these potentially conflicting requirements and expectations, a dynamic balance which needs to be tuned constantly. This trade-off is even more complex to achieve when considering that, both in retail and in corporate contexts, the payment transaction is usually just a portion (albeit fundamental) of a much broader and more complex process – the purchase process – which normally starts much earlier and ends well after the payment.
This is one of the reasons why at the EPC we’ve been working in recent years on a growing number of payment-related schemes, and why we’ll see more and more in the future.
As a second reflection, it is well known that one signature element of the ongoing digital revolution is that transformative technologies are not only impacting services but also their underlying business models. When applying this consideration to payment services, I believe that in spite of several innovations in retail and corporate payments of the last 20 plus years, there’s still a substantial space for innovation, e.g. through innovative pricing, data-driven business models, etc.
Finally, how do you see the European payments landscape evolving in the future and how would you like to contribute to it as a new Director General of the EPC?
The EPC and the community of PSPs are going to face multiple regulatory changes in the coming years, encompassing the European Commission’s (EC) proposal for a regulation on instant payments and the possible launch of the digital euro (including its legal tender status), the proposed revision of the EU Payment Services Directive (PSD2), as well as the new legislation proposal on open finance. All this comes in addition to ongoing initiatives, like, for example, the European retail payments strategy pushed forward by the Euro Retail Payments Board (ERPB), the European Central Bank (ECB) and the EC, and the G20 agenda on cross-border payments.
The good news is that the EPC, thanks to the collective efforts of the whole PSP community and of its own staff, is well prepared for managing these challenges. As an example, the One-Leg Out Instant Credit Transfer (OCT Inst) scheme which was approved as recently as March 2023, is the EPC contribution to improving the efficiency of cross-border international payments between SEPA and other jurisdictions. The SEPA Payment Account Access (SPAA) is a highly innovative and modular scheme which may, once consolidated, ideally support the evolution of the PSD and the introduction of an Open Finance framework. The SEPA Request-to-Pay (SRTP) and SEPA Proxy Lookup (SPL) schemes may be relevant assets in supporting the variety of use cases proposed for the digital euro.
As new Director General of the EPC, I believe my first duty is to fully exploit the value of existing EPC assets, such as EPC payment and payment-related schemes, to help face the forthcoming regulatory requirements and market challenges. The EPC should also help the PSP community, where possible, to realising economies of scope, leveraging earlier investments in payment and payment-related schemes to address new requirements.
A final important element of the future landscape is the geo-scope expansion of the SEPA. The EPC and SEPA are increasingly considered as fundamental elements of integration with the European Economic Area (EEA) and a key ingredient contributing to the economic growth and financial stability of developing economies. For this reason, I expect to see a further expansion of SEPA and to see EPC rulebooks and technical specs licensed to an increasing number of non-EEA countries, which may then rely on the high-quality and technological and business model neutrality of the EPC work.
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