Benoît Coeuré: Towards the retail payments of tomorrow - a
European strategy
Speech by Mr Benoît Coeuré, Member of the Executive Board of the European Central Bank, at
the Joint Conference of the European Central Bank and the National Bank of Belgium on
"Crossing the chasm to the retail payments of tomorrow", Brussels, 26 November 2019.
* * *
Europe has made important progress towards a true banking union in recent years. We now
have a single banking supervisor for significant institutions, a single framework for resolving
failing institutions, a single fund to finance those resolution activities, and we will soon have a
single backstop for that fund. There are also renewed hopes that political negotiations could soon
begin on a European deposit insurance scheme.
The European Commission has also launched an ambitious agenda for creating a capital
markets union. Although the pace at which co-legislators, and Member States in particular, have
progressed on individual Commission initiatives has often been sluggish, the recent
establishment of a high-level expert group might help overcome the remaining impediments and
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reinforce efforts to make European capital markets deeper and more liquid.
Step by step, we are improving our financial structures to support a single market of half a billion
consumers, underpin the stability of our single currency and channel savings towards financing
sustainable growth.
One area that has received less attention from policymakers in recent years, however, is the
European retail payments market, in particular point-of-sale and online payments. It is true that a
lot has been achieved at the back-end of European retail payments systems, most notably under
the umbrella of the Single Euro Payments Area, or SEPA. SEPA allows payments to be
processed across borders at the same cost, and as efficiently and safely, as national payments.
More recently, the Eurosystem has also introduced TARGET Instant Payment Settlement, or
TIPS. This service, which was launched a year ago, enables payment service providers to
transfer funds to their customers in real time, around the clock, every single day of the year. And
it settles the payments in central bank money.
But progress at the back-end has not translated into similar progress at the front-end, which
remains fragmented, with no European solution emerging for point-of-sale and online payments.
National providers in particular have not been able, or willing, to act in a pan-European manner.
20 years after the introduction of the single currency, we still do not have a European card
scheme. Ten European countries currently have national card schemes that do not accept cards
from other EU countries.
This has led to a notable rise in the use of non-European cards for non-cash payments. At the
end of 2016, the share of transactions made with international card schemes was a little more
than two-thirds. It is unfortunate that past harmonisation initiatives have failed to explore the
significant economies of scale that the Single Market offers.
In addition, the current situation has attracted new initiatives that aim to overcome shortcomings
in cross-border retail payments by building a new separate payments ecosystem.
These initiatives highlight the rapidly rising consumer demand for payment services that work
across borders and that are also faster, cheaper and easier to use. Among younger people in
particular, there is a willingness and curiosity to use new technologies and try new providers.
Relying exclusively on non-European and new ecosystems presents two risks, however.
The first relates to the untested nature of some initiatives. Global stablecoin arrangements, for
example, raise potential risks across a broad range of policy domains, such as legal certainty,
investor protection, financial stability and compliance with anti-money laundering requirements.
Public authorities have made clear that the bar will be set very high for these stablecoin initiatives
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to be allowed to operate.
The second risk relates to the autonomy and resilience of European payments systems.
Dependence on non-European global players creates a risk that the European payments market
will not be fit to support our Single Market and single currency, making it more susceptible to
external disruption such as cyber threats, and that service providers with global market power
will not necessarily act in the best interest of European stakeholders.
Strategic autonomy in payments is part and parcel of the European agenda to assert the euro's
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international role. The rising challenges to our global governance system have contributed to the
belief that the EU may be more exposed to the risk that the monetary power of others is not used
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in its best interests, or is even used against it.
The Eurosystem's retail payments strategy: a pan-European vision
The only effective response to these risks is for European stakeholders to step up their
collaboration and act together to provide payment solutions that both reflect the demands of
consumers and strengthen the Single Market.
With this in mind, earlier this month the ECB's Governing Council decided to relaunch its retail
payments strategy. The aim of our strategy is to inter alia actively foster pan-European market
initiatives for retail payments at the location of the purchase or interaction - so-called
point-ofinteraction, or POI, payments.
In the view of the Governing Council, these market initiatives would have to fulfil five key
objectives.
1. Pan-European reach and customer experience
Customers should be able to make POI payments throughout the entire European Union just as
efficiently and safely as in their home country. To this end, pan-European reach with wide
merchant acceptance and a sound and efficient governance (see below) is needed to achieve
critical mass, which is necessary for a network industry, and to fully exploit the benefits of the
Single Market. Scale will drive consumer adoption and trust, which is pivotal in e-commerce.
2. Convenient and cost-efficient
A European retail payments solution will only be accepted if it fully addresses user needs and
demands. So the solution needs to enable an easy, flexible, secure and user-friendly payment
experience for both consumers and merchants. This requires that payments can be performed
using different tools and instruments, such as payment cards, mobile phones, wearables and
instant payments, as well through other channels and technologies, such as near-field
communication.
Relying on previously unavailable instant payments technology could be the key to designing a
solution that is more efficient than existing ones. Subsequent cost savings for merchants will
eventually lower consumer prices and benefit every citizen.
3. Safety and security
A new European payments solution must comply with all relevant legal and regulatory
requirements. It should provide the highest levels of fraud prevention and offer consumer
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protection with robust complaint and refund procedures.
4. European identity and governance
A common brand and logo should be adopted to foster European identity. A European
governance structure could enable European payment stakeholders to have a direct influence on
the strategic direction and business models. These stakeholders should be incentivised to
design a payment solution under their governance that meets the needs of European customers.
5. Global acceptance
To fully meet the needs of end users, a new European solution should also be accessible to
merchants based outside the EU, which will reinforce economies of scale and domestic
adoption. Global acceptance should therefore be a long-term goal.
The need for a pan-European market-led solution
These five key objectives form the heart of the Eurosystem's retail payments strategy. They
provide a conceptual vision that should be fleshed out by the private sector.
The Eurosystem therefore welcomes the strategic initiative of a number of major European
banks to create a true pan-European retail payment solution that has the potential to meet the
vision of our strategy. The proposed solution would be based on the SEPA credit transfer instant
(SCT Inst) scheme, which is in our view the correct approach as it is future-oriented. And it could
capitalise from day one on existing powerful and sophisticated infrastructures, such as the
Eurosystem's TIPS.
What is now needed, however, is a strong commitment from the proponents of the new initiative,
and a clear roadmap to meet the envisaged objectives, so that we can see tangible actions
emerge soon. Proponents should also work closely with the European Commission to ensure
that any project will be open and comply with EU competition rules. This also means that if and
when other initiatives emerge, they will of course be considered equally.
Public initiatives may be useful and needed from time to time to support industry-led solutions.
The European Commission, for example, could propose legislation obliging payment service
providers to adopt instant payments within a certain period if a critical mass has not been
reached by, say, the end of 2020. Other regulatory changes may be needed in due course.
For its part, the Eurosystem stands ready to provide additional technical assistance where useful
and required. For example, we will analyse how we could support the search for solutions that
ensure that SCT Inst-compliant clearing mechanisms can be fully integrated. Current private
solutions for the clearing of instant payments still have not addressed interoperability issues in a
satisfactory manner. This requires further analysis and action.
The ECB will also continue to monitor how new technologies change payment behaviour in the
euro area, for example through a reduced demand for cash. We will explore how, and to which
extent, central banks would need to adapt their policies and instruments to face challenges to
consumer protection and monetary policy transmission that could arise from such changes.
For example, a central bank digital currency could ensure that citizens remain able to use central
bank money even if cash is eventually no longer used. A digital currency of this sort could take a
variety of forms, the benefits and costs of which the ECB and other central banks are currently
investigating, being mindful of their broader consequences on financial intermediation.
But potential central bank initiatives should not discourage or crowd out private market-led
solutions for fast and efficient retail payments in the euro area.
Conclusion
Let me conclude.
Global payments markets are undergoing a transformation. Rapid technological progress,
regulatory reforms and rising cross-industry initiatives, in particular by large global digital firms,
have led to unprecedented dynamics and are putting established banks and payment service
providers under considerable pressure.
In this environment, there are clear signs that Europe is at risk of losing its economic edge.
Country-specific solutions lack the necessary size and scale, and national fragmentation has
paralysed competition and stifled innovation on the pan-European level. In the worst case
scenario, this may endanger the autonomy of European payment systems.
The vision of an industry-led, pan-European retail payment solution is therefore at the heart of the
Eurosystem's retail payment strategy that I have outlined this morning. A pan-European strategy
that facilitates instant, secure and inexpensive payments - both online and in brick and mortar
stores - has the potential to make up lost ground and meet the rising needs of consumers for
efficient cross-border payments. Better affordability, quality and choice will also promote financial
inclusion.
The Eurosystem therefore welcomes the recent initiative of European banks to join forces and
envisage a payment solution for the euro area as a whole.
Thank you.
1
See also Coeuré, B. (2019), "European capital markets: priorities and challenges", dinner remarks at the
International Swaps and Derivatives Association, Frankfurt am Main, 25 June.
2
See G7 Working Group on Stablecoins (2019), Investigating the impact of global stablecoins, October.
3
See Juncker, J.C. (2018), "The Hour of European Sovereignty", State of the Union Address 2018; European
Commission (2018), "Towards a stronger international role of the euro", European Commission contribution to
the European Council and the Euro Summit, 5 December; and European Council (2018), "Statement of the Euro
Summit", 14 December.
4
See Coeuré, B. (2019), "The euro's global role in a changing world: a monetary policy perspective", speech at the
Council on Foreign Relations, New York City, 15 February.
5
In line with strong customer authentication (SCA) under the revised Payment Services Directive (PSD2).