The European Central Bank (ECB) has identified instant payments as its next goal, following last August’s launch of the single euro payments area (SEPA).
The ECB has established immediate availability of funds as the banking industry’s next frontier for harmonisation and cross-border collaboration.
In its second meeting on 1 December the Euro Retail Payments Board (ERPB), a multi-stakeholder group chaired by the ECB, decided to step up work on the topics of instant payments in euro, and person-to-person mobile payments and contactless payments.
Taking stock of the migration to SEPA, the ERPB also published a set of recommendations to address remaining issues in the credit transfer and direct debit schemes, such as the move to international bank account numbers (IBAN) only and harmonising payment standards between banks and customers.
In the area of instant payments, such as the UK’s Faster Payments scheme and Denmark’s recently inaugurated RealTime24/7 system, the ERPB is concerned that the emergence of new domestic platforms might end up creating a fragmented market in Europe for instant payments, similar to what existed in regular payments in the past.
“Solutions for instant payments should avoid the ‘silo’ mentality of closed systems that don’t communicate with each other, and take advantage of the harmonisation and integration already achieved with the SEPA project,” said Yves Mersch, member of the ECB’s executive board and chair of the ERPB. He added that the development of person-to-person mobile payments in euro may depend significantly on the availability of instant clearing services.
Taking into account emerging national solutions, ERPB members agreed on the need for at least one pan-European instant payment service for euro open to any payment service provider in the EU and called on the banking industry to assess the issues in achieving such a schem, for presentation to the board in June 2015. In so doing, the banks would be expected to consult with demand side with the active involvement of the European Payments Council (EPC) as a potential scheme developer.
Last May the ERPB annnounced plans to set up two working groups to focus on P2P mobile payments in euro and card and mobile-based contactless payments across the euro zone. The board says the P2P group is set to report back with its findings in June 2015, while the contactless council will deliver its recommendations in November 2015.
Assessing the Benefits
Barry Kislingbury, payments expert at ACI Worldwide, voiced approval for the ECB’s “important and welcome initiative.”
“With SEPA now a reality it is absolutely vital that European regulators make sure that any solutions for immediate payments avoid the ‘silo’ mentality of the legacy systems many banks are battling with today,’ he commented.
“Faster payments technologies are quickly emerging as the next wave of global payment innovation, and the latest research shows that globally half of all banks are planning to invest in Instant Payments systems.
“The ECB is rightly concerned that all the good work banks have done to harmonise euro payments around SEPA could be undone by new immediate payments schemes emerging across Europe, so it is important to act now.
“Banks might not immediately welcome the plans especially as many of them have made huge investments towards getting SEPA live. However, in the long run European harmonisation in this area will be beneficial to consumers and the industry as a whole.
“A single European Instant Payments scheme will open up the euro markets even more for consumers and businesses, will allow more innovation and save banks money on multiple schemes being implemented across Europe.”
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