SEPA as the Spur for Online Payment Services Innovation

Society and everyday commerce with it, is moving online and banks should have an active role in the move. The internet has irreversibly changed the way we carry out our day-to-day business. Consumers in this technologically-charged age are becoming increasingly demanding on all fronts. People want to be able to buy anything at anytime and anywhere. New mobile payment (m-payment) offerings regularly emerge to facilitate these purchases; money is being poured into ‘FinTech’, and the early adopters experiment with apps, wallets, widgets and tiles, often – but not always – tied to social media. Against this background, offering alternative payments is becoming a ‘must’ rather than a ‘plus’ for banks, as a corporate treasurer pointed out at a recent industry event in Luxembourg.

A Need for Europe-wide Online Payment Solutions

Positioning themselves in a market that is seeing many new entrants, new business models, accelerating IT innovation and newly emerging regulatory requirements presents banks with a number of challenges. Yet if they do not embrace the opportunities of e-SEPA now, they will put themselves at a serious competitive disadvantage and disappoint those customers who strongly believe that banks could offer a key to unlock new customer segments or markets, for instance by delivering solutions that support cross-border e-commerce.

European e-merchants continue to call for a pan-European online banking e-payments solution As Ecommerce Europe argues in its position paper on e-payments, launched at the association’s annual event in Barcelona last week, they believe it could “significantly reduce costs for consumers and retailers associated with mitigating fraud and authentication of the credit transaction, thereby increasing reach and conversion for retailers at a fair cost.”

By providing a way for consumers to pay for online purchases all across Europe from their bank account, banks (i.e. regulated payment service providers) can respond both to merchant expectations and to the need of consumers for a safe, real-time payment experience online. MyBank, a Europe-wide e-authorisation solution developed by EBA CLEARING, helps the bank offer this by using existing infrastructure and, in a first instance, provides solutions built on SEPA payment instruments. It enables safe digital payments and supports secure identity authentication through a consumer’s own online banking portal or mobile application.

MyBank for payments is live, enabling the initiation of SEPA credit transfers (SCTs) since March 2013. The solution is established and steadily growing, with over 140 banks across three European countries, more than 3,900 merchants and 12m customers already reachable. Efforts are ongoing to put in place interoperability with existing national online banking-based solutions, which will further widen the reach and support these national communities in their cross-border transactions.

MyBank mandates are scheduled to go live next October, creating a bank-driven electronic mandate for SEPA direct debits (SDDs). This follows an intensive testing period which involved several European corporates and banks. Further projects, such as a multi-currency solution and e-identity services, are in the pipeline to take the e-authorisation solution beyond SEPA payments.

Focusing on Security

Banking security is the core of MyBank. Being able to authenticate and authorise people by creating a direct link between a customer’s online bank account and the online business’s bank eliminates the need to collect and store personal data. Customer identity and confidential data are protected and the immediate authorisation of payments reduces the risk of fraud and charge-backs. Trust and confidence in online transactions is increased both at the buyer and seller level.

It is easy to use: consumers select the MyBank payment option from participating merchants, enter the name or bank identifier code (BIC) of their bank in a pop-up window and are immediately redirected to their own internet banking portal. After entering their regular log-on details, they are presented with a secure, pre-filled credit transfer or e-mandate containing all the relevant payment details to complete their transaction. As customers already have online or mobile banking, they do not need register or remember new passwords.

This combination of ease of use and high security levels helps merchants to unlock new customer segments. Fifty percent of citizens do not yet shop online, and those that do could move more of their spending online. In seven out of 10 online shopping transactions, consumers abandon their virtual shopping cart during the check-out phase. Being faced with payment methods customers do not feel comfortable with, having to enter large amounts of personal data and being redirected to an unfamiliar site for the payment process are among the top five reasons why they choose to abandon a purchase.

First analyses by a large utility that implemented MyBank in late 2013 confirm that adoption rates are especially high among customers who did not settle their bills via online payment methods before: six in 10 of the users had previously paid their bills in cash at the local post office while only 9% had previously used their cards.

Why Banks Should Act

Since it responds to major merchant and consumer needs, MyBank has the potential to put European banks and other payment service providers (PSPs) at the heart of the European digital economy. It gives the banks a set of business rules and specifications as the basis for their mobile and internet strategy and allows them to roll out innovative online payment products to their customers. The e-authorisation solution also creates new business opportunities, from reselling insurance to offering payment installments on large purchases. At the same time, it enables banks to cost-effectively leverage investments made in their online and mobile banking channels as well as in their SEPA infrastructure.

Most importantly, in this era where occupying space in the online world and keeping your customer engaged seem to supersede traditional business case calculations, MyBank helps banks to give customers what they want and to mitigate the threat that they will simply turn to other ways of paying and leave the banks with the expensive back-end and little space to manoeuvre.


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