ECBs 7th SEPA Progress Report: eps, iDEAL, giropay - a "proof of concept" exercise of interoperability

The provision of innovative payment services (online and mobile payment services), along with the creation of an additional European card scheme and the enhancement of the security of card transactions by phasing out the magnetic stripe on European cards are some of the key elements for the success of SEPA that still need to be addressed, according to ECBs 7th SEPA Progress Report.

Addressing the need for secure and efficient online payment solutions to be offered throughout SEPA

The importance of online payments for the competitiveness of the European online economy cannot be denied. Therefore, the Eurosystem strongly encourages the payments industry not to neglect this area and 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. At present, the most promising initiative is that of three online banking-based e-payment systems (eps, iDEAL, giropay) to run a “proof of concept” exercise of interoperability, using the EPC’s work on e-payments as the starting point.

Europe is still a patchwork of national online markets …

… but online banking-based services need to remain competitive

In Europe, online buyers use a mix of electronic and offline payment methods when making purchases on the internet. This diversity has given companies the ability to manage their business in different currencies and languages, but on the other hand has turned Europe into a complex market, thus making a harmonized European payment landscape difficult to achieve.

Card payments are still the most widely used payment method for online payments, but not the most suitable one for remote payments. As a result, many consumers, who are either unable (because their card is not accepted by online merchants) or reluctant to use cards for online shopping (because of fraud-related fears), have to rely on less efficient and more expensive payment instruments (including cash on delivery). But many of these consumers already have access to online banking and would thus be able to benefit from the availability of SEPA-wide online banking-based e-payment offerings.

The Eurosystem encourages banks which currently provide online banking but no online banking-based e-payments to start offering their customers access to these services. Instead of developing a scheme based on proprietary standards, banks should either use open standards when creating their own scheme or join an existing scheme, the report points out. Furthermore, in order to be competitive compared with alternative online payment solutions and to facilitate European cross border e-commerce in non-euro area EU countries, online banking-based services should not limit themselves to euro payments but also take multicurrency features into consideration.