Payment innovations can be either drivers of or barriers to the process of establishing a single and efficient market for payment services. On the one hand, they can speed up the integration process, whereby payment service providers move from offering solutions for a purely national market towards more integrated Europe-wide solutions.
On the other hand, they can slow down integration if, for instance, they act as a barrier to entry or contribute to the fragmentation of payment services offered in Europe. Some innovations and developments may potentially threaten the security and integrity of payment systems, while others may offer better protection against existing or new security threats.
Below is a short description of the most relevant types of retail payment innovation. A more detailed description of these innovations can be found in the 7th SEPA Progress Report. ( download [1.08 MB] ).
In addition to paper-based mandates, the SEPA direct debit enables the issuing of mandates that have been created through electronic channels, which are known as e-mandates. The e-mandate process allows debtors and creditors to agree on mandates in a fully electronic way. The e-mandate solution is based on online banking services, whereby the debtor can use his/her online banking credentials. The European Payments Council has provided rules for implementing the e-mandate service as an optional feature within the SEPA Direct Debit Scheme Rulebooks.
Online e-payments (internet payments) are payments for which the payment data and the payment instruction are transmitted and confirmed via the internet between the customer and his/her payment service provider in the course of an online purchase of goods or services from a web merchant.
This definition excludes payments that are initiated via an online banking application, but which are not integrated in the process of online shopping. No differentiation is made between the device (computer, mobile phone) and/or the service technology used to access the internet as long as the payment data is transmitted and confirmed via the internet.
Mobile payments (m-payments) are payments for which the payment data and the payment instruction are transmitted and/or confirmed via mobile communication and data transmission technology through a mobile device. Mobile payments can be classified as proximity payments (contactless payments using, for example, near field communication technology) and as remote payments.
Electronic invoicing (also known as electronic bill presentment and payment – EBPP) can be defined as the sending or making available of invoices and their subsequent processing and storage, wholly by electronic means.
Electronic invoicing offers substantial benefits over paper invoicing, such as faster payments, fewer errors, reduced printing and postage costs and, most importantly, full process automation and integration from order to payment between trading parties. It is estimated that businesses in SEPA can save up to €65 billion per year when using e-invoicing. For further information on e-invoicing and the role of the European Commission therein, see the European Commission’s website.
Since the idea of SEPA is to establish a single market for euro payments, it follows that innovation should not lead to new fragmentation. New solutions should therefore be rolled out not only in the national context, but throughout Europe, and should offer the same kind of user experience and service levels.
The Eurosystem’s expectations are in line with the conclusions of the ECOFIN Council meeting of 2 December 2009, in which the Council acknowledged the importance of developing innovative payment solutions that underpin an efficient and competitive European economy.
The Eurosystem’s expectations regarding the various types of retail payment innovation can be found in the 7th SEPA Progress Report ( download [1.08 MB] ). They are summarised below:
Although the e-mandate solution will be an optional service offered by banks to their customers, the Eurosystem encourages banks to start offering this mandate process. e-mandates are likely to increase the acceptance of SEPA Direct Debit by payers and payees and to offer new opportunities for online e-payment services.
Europe is still a patchwork of national online markets. According to a study undertaken on behalf of the European Commission, the safe payment of cross-border internet purchases is often difficult or not possible. Considering the strong growth in internet purchases and the increase in fraud with online card payments, the Eurosystem sees a genuine need for European-wide online e-payment solutions that are highly secure, privacy-compliant and user friendly. These solutions should offer a sufficient degree of choice, but market fragmentation should be avoided. This requires open market access and a level playing field for new and incumbent payment service providers based on proper certification, supervision, oversight and an adequate legal framework. In this respect, the Eurosystem encourages the payment industry to speed up the development of SEPA-wide e-payment services based on the online banking infrastructure.
Various studies and reports published in recent years expect mobile payments to become increasingly popular. However, establishing an m-payments network is complex given the many parties and stakeholders involved.
In order to avoid fragmentation in the market for m-payments as a result of the adoption of different technologies and standards, it is important that open standards are agreed. The Eurosystem expects the European Payments Council to take an active role in the standardisation efforts, and that the various initiatives active in this area will be aligned with the European Payments Council’s work. This should allow interoperability of m-payment schemes and enable the development of SEPA-wide m-payment services.
The Eurosystem welcomes the efforts made by the European Commission’s expert group on e-invoicing to align existing e-invoicing solutions and set up pan-European e-invoicing. It sees such initiatives as very important, as they will help SEPA to become a success for all stakeholders and will benefit the European economy.
Various stakeholders are involved in the process of developing and implementing SEPA-wide innovative payment services. At the European level, several initiatives are working towards greater interoperability, harmonisation and standardisation of e-service provision. The most relevant stakeholders and initiatives at European or global level are listed below.
The European Commission brings together various stakeholders at the European level and takes initiatives for regulation to improve the competitiveness and efficiency of the European retail financial services markets. In this way, it improves conditions for the further development of payment services and fosters the smooth and safe functioning of the European payment services market.
The European Commission’s competition policy is also of relevance for developments in retail payment services in view of the many initiatives among competitors in the payment services market to jointly develop interoperability frameworks and common standards. These cooperation arrangements are aimed at preventing fragmentation and resolving the wait-and-see approach on the part of potential investors, but they may also give rise to competition concerns.
The European Payments Council (EPC) is the decision-making and coordination body of the European banking industry in relation to payments. The EPC develops the payment schemes and frameworks necessary for the realisation of SEPA.
In the field of development and innovation of payment services, the EPC’s SEPA Direct Debit Rulebooks provide for an e-mandate solution, which can be offered by banks to their customers as an optional service.
In the area of m-payments, the EPC is working together with mobile network operators and other stakeholders to establish standards and business rules with regard to credit card, debit card and other card payments via mobile phones. In November 2011 the EPC published a final version of the “Mobile Contactless SEPA Card Payments Interoperability Implementation Guidelines”.
With regard to e-payments, the EPC has committed itself to developing the “SEPA e-Payment Framework”, which is designed to support interoperability between existing e-payment schemes, as well as new e-payment schemes that reuse the SEPA Credit Transfer Scheme. Three e-payment solutions based on online banking (eps in Austria, giropay in Germany and iDEAL in the Netherlands) currently run a ”proof of concept” interoperability exercise.
Mobey Forum brings together financial institutions, mobile network operators, mobile handset manufacturers, payment processors and vendors, who are committed to accelerating the mass-market deployment of user-friendly mobile financial services by promoting open and secure technology standards.
The International Council of Payment Network Operators (ICPNO) was established in 2008 to set common standards and rules for the interoperability of national payment networks for online banking e-payments. Interoperability should extend access to consumers and merchants on other networks and result in greater transaction volumes for all participating networks. Global network interoperability will be facilitated by agreeing common standards and rules covering critical issues, such as legal compliance, security, international settlement, fee structure, exchange rate mechanisms, technology integration and communications.
The European E-invoicing Service Provider Association (EESPA) is a non-profit organisation established in 2011 consisting of over 30 companies providing e-invoicing services in Europe. The EESPA’s objectives are, among others, to represent the supply side of the industry in the European e-invoicing multi-stakeholder forum and to develop and/or adopt industry standards and interoperability arrangements. There are already several initiatives underway to promote the interoperability of e-invoicing schemes, both at national and cross-border level (such as the Euro Banking Association), but the EESPA is the first truly pan-European initiative in this area.
eSEPA stands for a Single Euro Payments Area in which service providers make use of advanced information and communication technology when offering payment-related services. eSEPA services are provided in addition to SEPA’s core and basic services and focus on the customer-to-bank domain. eSEPA services are expected to bring the customer benefits in terms of easier access to payment services, better functionality and/or a more attractive user experience.
There is a close link between retail payment innovations and eSEPA services, but the concepts are not necessarily the same. Over time some eSEPA services will become commonplace and may no longer be regarded as innovative. Furthermore, not all payment innovations take place within SEPA or are based on the standard SEPA instruments (i.e. SEPA credit transfers, SEPA direct debits and cards).
The eSEPA newsletter provides non-exhaustive information on recent developments in the innovation of retail payments and the integration of retail payment markets and infrastructures. The eSEPA newsletter series started in 2010. Published by the Market Integration Division of the ECB, it delivers a digest of news items from the retail payments industry, regulatory initiatives, as well as studies, reports and events on payment innovation and payment regulation related to SEPA and beyond. Subscribers are payment experts interested in information on retail payments from the ECB, the European Commission, national central banks and other parties.
From time to time the ECB looks into specific developments in retail payments to assess if they affect the tasks of the Eurosystem. Some of the results were published in special reports and discussed at special conferences.