In the movement towards a common European market, the recent months have seen the European Commission pushing several initiatives regulating interchange fees:
• In February, it has adopted a settlement decision bringing to an end the legal proceedings against Visa Europe containing a cap on interchange fees for credit card transactions at 0.3%, after having reached a binding agreement for debit card transactions at 0,2% in December 2010.
• In April, the Parliament will vote on the updated proposals for a new Payment Service Directive (PSD2) and a Regulation project on interchange fees for card-based payment transactions, issued in July 2013, taking into account several amendments and compromises. The EU Council has to agree to Parliaments´ position afterwards for final adoption.
• In Q2 2014, a judgment from the EU Court of Justice is expected concerning the MasterCard investigations from December 2012 on the same topic.
As those decisions are significantly impacting the business models and go-to-market strategies, all stakeholders should continue their lobbying actions while preparing concrete implementation options.
Anticipate and act pro-actively
Major impacts to consider:
• The harmonization of interchange
* will force issuers to review their strategy, especially in countries where interchange is a key contributor to their business case
* will lead to an internal European market where issuers and acquirers will benefit from less complex licensing and pricing models
* will lead to a further consolidation of processors
* will increase pressure on domestic schemes.
• The bundle of fee cap with associated business rules
* will oblige issuers and acquirers to review their services offerings and card portfolios in order to adapt their go-to-market strategies to the new context
* will provide all stakeholders with common legal and technical frameworks
• The Digital Agenda
* will increase competitiveness, due to the regulation of players like iDeal, Trustly, Paypal as Third Party Providers.
* will clarify the liability along the value chain
* will provide rules and implementation guidance for data security and data protection.
To maintain current levels of profitability, the current approach to payment needs to be reinvented.
Reinvent the payment
(1) Sourcing strategy to be newly defined for cost optimization
To adapt to the changing environment, issuers and acquirers need a partner who offers significant scale, functional and geographical scope as well as innovation capabilities.
(2) Value Added Services in new ecosystems as differentiators Innovative products and services will help to identify new revenue streams and attract cardholders and merchants. Card-Linked offers, such as Cash Club, leveraging the valuable data owned by the issuers is a good example. In this model, cardholders receive coupons from the merchants who are targeting consumers, based on spending patterns.
(3) Holistic payment approach to replace silos
Digital wallets will integrate card and non-card payments means (such as Online Banking ePayment) together with features for access control, ticketing, ID cards, eHealth pass, loyalty programs, etc. Thinking in ecosystems instead of linear supply chains opens opportunities for innovative offers with shared risk, controlled costs and fast time-to-market with critical mass. It leads to new business models considering strategic partnerships ensuring a successful positioning in the changing and regulated payment market.
Worldline has outlined position papers for issuers and acquirers to support their impact analysis and to respond to their needs. Download the position papers at http://worldline.com/en/165/Our-brochures.html#positionpapers
Company description
Worldline, an Atos subsidiary, is the European leader and a global player in the payments services industry. Worldline delivers new generation services, enabling its customers to offer smooth and innovative solutions to the end consumer.
Worldline offers a unique and flexible business model built around a global and growing portfolio, thus enabling end-to-end support. Worldline activities are organized around three axes: Merchant Services & Terminals, Mobility and e-Transactional Services, Financial Processing Services & Software Licensing.
About Wolf Kunisch
• Since 2014 Wolf Kunisch is the co-head of the Global Business Line Financial Processing at Worldline
• Wolf Kunisch is also responsible for the regional business unit Germany & CEE and as such the General Manager of Worldline Germany (since 2010) and Worldline Austria (since 2013)
• He joined Atos in September 2000 where he had several positions being responsible for the identification and development of new business areas with innovative and international character.
• Before joining Atos he worked for Roland Berger Strategy Consultants in Stuttgart, Germany, and Paris, France, as project leader.
• Wolf Kunisch graduated in industrial engineering at the Berlin Technical University and holds a Master of Business Administration (MBA) of INSEAD in Fontainebleau, France.
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