Creating an integrated card, e-payments and mobile payments market for Europe
07 February 2012
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A version of this article
was published in E-finance & Payments Law and Policy in
February 2012
The European Commission has
set out its vision for a fully integrated European payments market;
one in which the consumer has access to a diverse range of secure,
non-cash payment instruments to make low and high value purchases,
online and offline, throughout the EU. A fully
integrated payments market for card, internet and mobile payments
is not only essential to achieving a Digital Single Market, argues
the Commission, but will also lead to increased competition,
innovation and lower costs for merchants and therefore lower prices
for consumers.
In a Green
Paper and consultation issued on 11 January 2012, the
Commission asks stakeholders how this vision might be
achieved. The Green Paper identifies a number of
obstacles to integration across different payment instruments and
channels, focusing on five key areas:
Market
fragmentation, market access and entry across
borders: The Commission identifies a
number of factors that affect card payments in particular, although
it points out that many of the same issues also impact internet and
mobile payment channels. These include:
- National differences in Multilateral Interchange fees
(MIFs): MIFs are the interbank fees – agreed and set by the
participants of a payment scheme – that are paid by the merchant's
payment service provider to the cardholder's payment service
provider on each transaction. MIFs in the same scheme can
differ between Member States and different rates can apply for
domestic and cross border payments. The Commission asks
whether these differences hinder market integration and whether
action is necessary.
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- Disincentives for
cross-border acquirer services: International card
scheme rules currently hinder merchants from shopping around
between Member States in order to take advantage of the lowest
acquirer fees.
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Co-badging: Allowing different payment brands to
co-exist on the same card or device could benefit new market
entrants and increase consumer choice at the point of sale.
The Commission asks for views on the potential benefits and
drawbacks of co-badging as well as existing restrictions.
- Access to settlement
systems: "Payment institutions" (broadly, non-traditional
categories of payment service providers) argue that they are unable
to compete with banks on an equal basis as they have to use banks
to provide clearing and settlement services. Stakeholders are
invited to provide information on the magnitude of the problem and
whether a common cards-processing framework should be
established
Lack of
transparency: Consumers are often not aware of
the cost associated with their use of particular payment
instruments. Merchants bundle the cost into the price of
their goods and services, and consumers base their choice of
payment instrument on other factors, such as the opportunity to
earn air miles. The Commission wants to assess the impact
increased transparency might have on consumer behaviour and on the
cost of payment services.
Lack of common
standards: Common, open standards can ensure
that payment services are interoperable and not fragmented along
national boundaries, or in the mobile payments sphere, on the basis
of providers' individual proprietary solutions. They
also play a part in ensuring that consumers can take their payment
application with them irrespective of their choice of handset or
mobile operator. Both the Commission and the European
Payments Council view the SEPA project as the springboard for
developing common standards in mobile payments across the EU.
(In November last year, the EPC published the final version of its
"Mobile Contactless SEPA Card Payments Interoperability
Implementation Guidelines".)
Security: Finally, the Green Paper
asks stakeholders whether proximity m-payments are sufficiently
secure; whether additional security requirements required and
whether payment security should be regulated.
The Green Paper is open for
consultation until 11 April 2012. The Commission will
announce the next steps to be taken before the summer of 2012 and
aims for legislative proposals to be adopted by the fourth quarter
of 2012 or the first quarter of 2013.
If you would like to discuss
the issues raised in the Green Paper or if you would like
assistance in formulating a response to the Commission's
consultation, please contact John
Worthy or Nick
Pimlott.