In January 1994, he joined the European Monetary Institute and was appointed Senior Adviser to the Head of the Monetary, Economics and Statistics Department. In 1998 he joined the European Central Bank, where he became counsellor to T. Padoa-Schioppa, member of the Executive Board. He was subsequently Principal Adviser in the Directorate General International and European Relations (2003) and the Directorate General Human Resources, Budget and Organisation (2005). He took up his current role in 2010.
What are the key points that you will be discussing at the upcoming EPCA conference and what prompted you to highlight these particular topics at this event?
I will address some of the challenges for the European payments landscape as regards online e-payments, mobile payments and card payments. In addition, I will reflect on the overarching objective of trust and security in payments. These topics are, I believe, key success factors for the future of an integrated and efficient retail payments market.
In what way does your presentation at EPCA relate to the event’s motto for this year: “Unlocking the payments potential: Imagine. Create. Innovate”?
The European retail payments market has seen fundamental changes in the past decade. Ten years ago, when Regulation 2560/2001 on cross-border payments in euro was adopted, nobody imagined that this would be the starting point for a true single euro payments area. In a joint effort, the payments industry has created European-wide schemes for credit transfers and direct debits. Now that these core instruments have successfully been launched and the European Commission has published a legal proposal for a SEPA migration regulation, it is time for the European payments industry to step up its efforts in innovative payment services, such as online e-payments or mobile payments.
What are the barriers to innovation in the European payments landscape and how can they be overcome?
Despite the single market objective, Europe is still a patchwork of national online markets, and Europeans are prevented from enjoying the benefits of a digital single market. This should be achieved by eliminating regulatory barriers and facilitating electronic payments and invoicing, dispute resolution and customer confidence. Currently, only 8% of online shoppers in the EU buy from another country, and, according to a study undertaken by the European Commission, 60% of attempted cross-border internet shopping orders fail for technical or legal reasons, such as the refusal of non-domestic credit cards. We therefore support the ambitions formulated in the European Commission’s Digital Agenda for Europe.
In your opinion, innovation in payments stands for…
…continuous improvement and adaptation of existing concepts and technologies. History has shown that radical, disruptive innovations in payments are very rare and that only a few have been successful. The “oldest” payment innovations, i.e. coins and banknotes, still dominate at the physical point of sale. Innovations in online payments and mobile payments rely heavily on existing payment infrastructure, e.g. cards or credit transfers. That said, one should not downplay the importance of these innovations, since they can grant payers easy access to their traditional payment instruments and are therefore definitely of benefit for payers, payees and the overall economy.
Are traditional banks still needed in payment innovation nowadays?
The Eurosystem strongly encourages the payments industry, be it “traditional” banks, e-money institutions or payment institutions, not to neglect the important area of online e-payments and mobile payments. The high share of unsuitable and less efficient payment instruments used for online payments and the call from various stakeholders for European solutions have shown that there is not only room, but also a genuine need, for alternative online payment solutions based on online banking. Banks which are currently offering online banking but no online banking-based e-payments (OBeP) should start to offer these services to their customers. However, they do not need to reinvent the wheel. Rather than developing a scheme based on proprietary standards, they should either use open standards when setting up their own scheme or join an existing scheme. I therefore share the view already expressed by ECOFIN at the end of 2009, when the European finance ministers called on the financial industry to deliver solutions for online electronic payments and for mobile payments. Moreover, banks and payment service providers were asked to develop and actively market attractive e-payment and m-payment services.
In order to compete with alternative online payment solutions and to facilitate European cross border e-commerce, online banking-based e-payment services should …
As a first step, the Eurosystem calls upon existing schemes to become interoperable by allowing the exchange of guaranteed payments between a payer who is a member of one scheme and the payee of another scheme. This interoperability should be based on transparent and open standards, taking advantage of the standards used in SEPA as far as possible. The existing schemes in Austria, Germany and the Netherlands are currently evaluating the feasibility of interoperability by using the work of the European Payments Council on e-payments as the starting point. This proof of concept exercise is fully supported by the Eurosystem, and it is expected that the three schemes will be open to requests from other communities or schemes if they would like to join.
In general no unwarranted barriers should prevent schemes from becoming interoperable with others; proper governance should ensure that progressive communities are not held back by banks and/or communities less interested in OBeP.
Once in place, interoperability should become visible to online shoppers (e.g. by usage of a co-brand). In the medium to long term, interoperability should even go further and result in an alignment of business rules and the technical implementation. In order to avoid a lack of competition, proper measures for the separation of the scheme from the processing have to be taken by the existing schemes.
In order to compete with alternative online payment solutions and to facilitate European cross-border e-commerce in non-euro area EU countries, services based on online banking should not limit themselves to euro payments, but take multicurrency features into consideration as well.
The directions of development for successful SEPA migration are….
Despite achieving a number of milestones, SEPA migration, as a self-regulatory process, has not achieved the required results. To ensure the materialisation of SEPA benefits, a migration end date by regulation for the SEPA credit transfer and SEPA direct debit schemes is required and should be set by the EU legislator. Therefore, the Eurosystem welcomes the European Commission’s initiative for an end date for migration by means of an EU regulation. The Eurosystem expects that a mandatory timeline for migration to SEPA instruments will significantly accelerate the pace of transition, enabling SEPA to be completed, preferably, by the end of 2012 for credit transfers and by the end of 2013 for direct debits.
What are your expectations from EPCA?
I am taking part in the EPCA conference for the first time. However, based on the feedback on previous events, I expect forward-looking and intensive discussions on the future direction of retail payments.
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