COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS on a Retail Payments Strategy for the EU
Date: 2020-09-24
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: EU strategy, consumer protection, electronic banking, electronic money, innovation, international payment, intra-EU payment, paper money, payment system, retail trade

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 24.9.2020  COM(2020) 592 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS on a Retail Payments Strategy for the EU        
 
 
AIS 

Account Information Services 

LIST OF ACRONYMS 

AML/CFT  Anti-Money Laundering and Combating the Financing of Terrorism 

API 

Application Programming Interface 

ATM   

Automated Teller Machine 

CPACE 

Common Payment Application Contactless Extensions 

CSM 

EBA 

ECB 

eID 

Clearing and Settlement Mechanism 

European Banking Authority 

European Central Bank 

Electronic Identification 

ELTEG 

Euro Legal Tender Expert Group 

EMD2  

Revised E-Money Directive 

EPC 

European Payments Council 

ERPB   

European Retail Payments Board 

IBAN   

International Bank Account Number 

NFC 

PIS 

POI 

POS 

Near Field Communication 

Payment Initiation Services 

Point of Interaction 

Point of Sale 

PSD2   

Revised Payment Services Directive 

PSP 

Payment Service Provider 

SEPA   

Single Euro Payments Area 

SCT 

SEPA Credit transfer 

SCT Inst. 

SEPA Instant Credit Transfer 

SDD 

SCA 

SFD 

TIPS 

TPP 

SEPA Direct Debit 

Strong Customer Authentication 

Settlement Finality Directive 

TARGET Instant Payment System 

Third-Party Provider 

SWIFT 

Society for Worldwide Interbank Financial Telecommunication 

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COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

on a Retail Payments Strategy for the EU 

I.  Context and challenges 

Once relegated to the back-office, payments have become strategically significant. They are 
the  lifeblood  of  the  European  economy.  In  its  Communication  from  December  2018,  the 
Commission  supported  “a fully integrated instant  payment  system in  the EU, to  reduce the 
risks  and  the  vulnerabilities  in  retail  payment  systems  and  to  increase  the  autonomy  of 
existing payment solutions.”1 

As highlighted in the digital finance strategy, adopted alongside this Communication, digital 
innovation  is  radically  reshaping  the  provision  of  financial  services.  The  retail  payments 
sector is at the forefront of the trend and the pace and scale of technological change in that 
sector requires specific and targeted policy measures that go beyond the horizontal scope of 
the digital finance strategy. 

Over  the  last  decade,  most  payments  innovations  have  focused  on  improving  customer 
interfaces  (e.g.  mobile  apps)  or  front-end  solutions,  without  fundamentally  changing  the 
payment instruments used (cards, bank transfers etc.).  

Recently,  however  several  significant  trends  have  emerged.  The  act  of  paying  has  become 
less  visible  and  increasingly  dematerialised  and  disintermediated.  Large  technology 
companies  (‘BigTechs’)  have  become  active  in  the  payments  sector.  Benefitting  from 
significant network economies, they can challenge established providers. Moreover, with the 
emergence  of  crypto-assets  (including  so-called  ‘stablecoins’)  they  may  soon  be  offering 
disruptive payment solutions  based on encryption and distributed ledger  technology (DLT). 
In spite of this wave of innovation, most of the new digital payment solutions are still largely 
based  on  traditional  cards  or  bank  transfers,  irrespective  of  whether  they  are  offered  by 
incumbent banks, card companies, financial technology firms (FinTechs), or BigTechs. 

Innovation  and  digitalisation  will  continue  to  change  how  payments  work.  Increasingly 
payment  service  providers  will  abandon  old  channels  and  traditional  payment  instruments 
and develop new ways to initiate payments, such as ‘wearables’ (watches, glasses, belts etc.) 
or parts of the body, sometimes even eliminating the need to carry a payment device, building 
on advanced authentication technologies such as those relying on biometrics. As the internet 
of  things  further  evolves,  devices  such  as  fridges,  cars  and  industrial  machinery  will 
increasingly connect to the internet and become conduits for economic transactions.  

1 Commission’s Communication “Towards a stronger international role of the euro” from December 2018. 
https://ec.europa.eu/info/sites/info/files/com-2018-796-communication_en.pdf  

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With digitalisation and changing  consumer preferences, cashless transactions are increasing 
rapidly2.  The  Covid-19  pandemic  has  further  reinforced  the  shift  to  digital  payments  and 
confirmed  the  vital  importance  of  safe,  accessible  and  convenient  (including  contactless) 
payments  for  remote  and  face-to-face  transactions.  However,  cash  remains  the  means  used 
for a majority of retail payments in the EU. 

The  public  and  private  sectors  have  complementary  roles  to  play  in  the  future  payments 
landscape.  As  more  and  more  central  banks  around  the  world  look  into  the  possibility  of 
issuing  central  bank  digital  currencies  (CBDCs),  there  are  tangible  prospects  of  further 
significant changes in the retail payments market.  

A fragmented EU market 

There have been substantial improvements in recent years, thanks mostly to the development 
of  the  Single  Euro  Payment  Area  (SEPA)  and  to  the  harmonisation  of  retail  payments 
legislation. However, the EU payments market  remains, to a significant  degree, fragmented 
along  national  borders,  as  most  domestic  payment  solutions  based  on  cards  or  instant 
payments do not work cross-border. This comes to the advantage of a handful of big global 
players, which capture the whole intra-European cross-border payments market.  

With the exception of those large global players, including worldwide payment card networks 
and large technology providers, there is virtually no digital payment solution that can be used 
across Europe to make payments in shops and in e-commerce. In their response to the public 
consultation  on  this  strategy,  several  FinTechs  active  domestically  reported  that  this 
fragmentation was obstructing their efforts to scale-up across the Single Market.  

At  the  same  time,  there  have  recently  been  a  number  of  encouraging  developments.  For 
example,  on  2  July  2020  a  group  of  16  European  banks  launched  the  European  Payment 
Initiative  (EPI)3  project  with  a view to  offering  a pan-European payment solution  by 2022. 
The  Commission  and  the  European  Central  Bank  (ECB)  had  given  this  initiative  their 
political  support  from  the  beginning  and  welcomed  its  launch4.  Other  promising  market-
driven initiatives have emerged recently that are aimed at designing common infrastructures5, 
at  increasing  cooperation  and  interoperability  between  domestic  payment  solutions6  and 
developing new common payment solutions.  

In parallel, several initiatives pursued under the auspices of the Euro Retail Payments Board7 
(ERPB) and the European Payments Council (EPC) are aimed at adopting common European 
schemes and rules,  which should eventually  facilitate the emergence and  interoperability of 
instant payment solutions in shops and e-commerce. 

2 According to the ECB, in 2018, cashless payments reached 91 billion transactions in the euro area and 112 
billion in the EU while they were about 103 billion in 2017. 
3https://group.bnpparibas/en/press-release/major-eurozone-banks-start-implementation-phase-unified-
payment-scheme-solution-european-payment-initiative-epi  
4 https://ec.europa.eu/info/news/200702-european-payments-initiative_en  
and https://www.ecb.europa.eu/press/pr/date/2020/html/ecb.pr200702~214c52c76b.en.html 
5 Such as P27 in the Nordic countries 
6 E.g. the European Mobile Payment Systems Association (EMPSA) 
7 The Euro Retail Payments Board (ERPB) is a high-level body chaired by the ECB, bringing together the supply 
and demand side of the European payments industry 

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Why a strategy?  

All these initiatives demonstrate the dynamism of the European payments landscape. There is 
however a risk of inconsistencies and further market fragmentation. There is also a need for a 
clear ‘governance’ framework to underpin the EU retail payments strategy. EU institutions – 
and in particular the Commission – can play a role of political catalyst, whilst relying fully on 
the  private  sector  to  design  the  relevant  payments  solutions.  It  is  therefore  of  crucial 
importance to develop a clear vision, setting out the expected direction of travel and placing 
future actions under a single, coherent and overarching policy framework. This is the aim of 
the present Communication.   

II.  A vision for European retail payments 

The Commission’s vision for the EU’s retail payments is that: 

-  Citizens  and  businesses  in  Europe  benefit  from  a  broad  and  diverse  range  of  high-
quality  payment  solutions,  supported  by  a  competitive  and  innovative  payments 
market and based on safe, efficient and accessible infrastructures;  

-  Competitive  home-grown  and  pan–European  payment  solutions  are  available, 

supporting Europe’s economic and financial sovereignty; and  

-  The  EU  makes  a  significant  contribution  to  improving  cross-border  payments  with 
non-EU jurisdictions, including remittances, thereby supporting the international role 
of the euro and the EU’s ‘open strategic autonomy’. 

The Commission’s objective is that of a highly competitive payments market, benefitting all 
Member  States,  whichever  currency  they  use,  where  all  market  participants  are  able  to 
compete on fair and equal terms to offer innovative and state-of-the-art payment solutions in 
full respect of the EU’s international commitments. 

As payments are at the forefront of digital innovation in finance, implementing this strategy 
will contribute to the Commission’s broader vision for digital finance and to its objectives of: 
removing  market  fragmentation,  promoting  market  driven  innovation  in  finance  and 
addressing  new  challenges  and  risks  associated  with  digital  finance  whilst  ensuring 
technology  neutrality.  This  strategy  is  therefore  presented  alongside  the  digital  finance 
strategy and the two legislative proposals on a new EU framework for strengthening digital 
operational  resilience  and  on  crypto-assets.  It  is  also  complementary  to  the  updated  retail 
payments strategy presented by the ECB/Eurosystem in November 2019.8 

This strategy focuses on the following four key pillars, which are closely interlinked: 

1)  increasingly digital and instant payment solutions with pan-European reach; 
2)  innovative and competitive retail payments markets;  
3)  efficient  and  interoperable  retail  payment  systems  and  other  support  infrastructures; 

and 

4)  efficient international payments, including remittances. 

8 https://www.ecb.europa.eu/press/key/date/2019/html/ecb.sp191126~5230672c11.en.html 

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III. Pillars for strategic actions 

A.  Pillar  1:    Increasingly  digital  and  instant  payment  solutions  with  pan-European 

reach  

The  Commission  wants  citizens  and  companies  in  Europe  to  be  able  to  access  and  rely  on 
high quality payment solutions to make all their payments. These solutions should be secure 
and cost-efficient, and enable similar conditions for cross-border transactions as for domestic 
ones. Given the competitive and innovative potential of instant payments, as recognised in its 
December 2018 Communication,9 the Commission believes that such solutions should largely 
rely on instant payment systems. 

1.  Instant payments as the ‘new normal’ 

With  instant  payments,  funds  are  immediately  available  to  the  payee.  Combined  with  the 
development  of  mobile  payment  services,  instant  payments  may  offer  EU  payment  service 
providers (PSPs) an additional opportunity to compete with their EU and global competitors. 
As stated in the Commission’s December 2018 Communication: “an EU-wide cross-border 
instant  payment  solution  would  complement  current  card  schemes,  reducing  the  risk  of 
external disruption and making the EU more efficient but also more autonomous.”  

Instant payments are suitable for many uses beyond traditional credit transfers, in particular 
for physical and online purchases, which are currently dominated by payment card schemes.   

The  Commission  is  aiming  for  the  full  uptake  of  instant  payments  in  the  EU  by  end-2021. 
That  will  depend  on  significant  advances  on  three  levels:  rules,  end-user  solutions  and 
infrastructures. Significant progress has already  been achieved on all three fronts, but some 
challenges remain and need to be addressed.   

Uniform rules 

Having  uniform  rules  for  the  execution  of  payment  transactions  that  set  out,  for  example, 
payment  service  providers’  mutual  rights  and  obligations,  is  indispensable.  The  European 
Payments Council (EPC) developed a 'Scheme’ for instant payments in euro (the ‘SCT Inst. 
Scheme’)  in  2017,  as  it  had  already  done  in  the  past  for  SEPA  direct  debits  and  credit 
transfers. The scheme enables funds to be available on the account of the payee in less than 
ten seconds.  

Unfortunately, in August 2020, after nearly three years since its introduction, only 62,4% of 
all EU payment service providers offering SEPA credit transfers had joined the SEPA Credit 
Transfer  Inst.  Scheme10.  In  terms  of  payment  accounts,  the  European  Payments  Council 
estimates that there are 12 EU Member States (all from the euro area) where more than half 
of the payment accounts are reachable for SCT Inst.  

9 See footnote 1 
10 https://www.europeanpaymentscouncil.eu/what-we-do/sepa-instant-credit-transfer. For the euro area only 
the penetration rate currently amounts to 65.9%. The penetration rate of all SCT scheme participants is 56.1%. 

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As the owner of the SCT Inst. Scheme, the European Payments Council has made efforts to 
promote adherence. For example on 1 July 2020 it increased the maximum amount per SEPA 
Instant  Credit  Transfer  transaction  from  15.000  to  100.000  euro.  However,  the  current 
voluntary  nature  of  the  Scheme  has  not  attracted  sufficiently  rapid  and  broad  participation. 
Some  euro  area  Member  States  are  clearly  lagging  behind.  The  Commission  therefore 
believes that action is likely to be necessary in  order to accelerate the pace of adherence to 
the SCT Inst. Scheme. 

The  SEPA  Regulation  requires  the  participants  in  the  payment  scheme  to  represent  “a 
majority  of  PSPs  within  a  majority  of  Member  States,  and  constitute  a  majority  of  PSPs 
within the Union, taking into account only PSPs that provide credit transfers or direct debits 
respectively.”11  With  the  National  Bank  of  Belgium  (which  is  the  national  competent 
authority monitoring the SCT Inst. Scheme under the SEPA Regulation), the Commission is 
examining  the  legal  implications  of  the  expected  failure  to  fully  comply  by  21  November 
2020 (i.e. the end of the temporary exemption period) with those adherence requirements. 

Key action: 

In November 2020, i.e. at the expiration of the temporary exemption period set by the 
SEPA Regulation for meeting the adherence requirements of the SEPA Instant Credit 
Transfer  (SCT  Inst.)  Scheme,  the  Commission  will  examine  the  number  of  payment 
service  providers  as  well  as  the  number  of  accounts  able  to  send  and  receive  SEPA 
instant  credit  transfers.  The  Commission  will  assess  whether  these  numbers  are 
satisfactory  and,  on  that  basis,  decide  whether  it  is  appropriate  to  propose  legislation 
requiring payment service providers’ adherence to the SCT Inst. Scheme by the end of 
2021.  Such  a  proposal,  if  decided,  would  lay  down  the  criteria  for  determining  which 
payment service providers should be subject to obligatory participation.  

End-user solutions 

At  the  end-user  level,  the  Commission  expects  payment  solutions  to  be  interoperable, 
accessible, to add value and meet the needs of a broad range of users, including businesses of 
different sizes, without excluding categories of customers, such as older persons or persons 
with disabilities.  

The Commission fully supports and is involved in the important work carried out by the Euro 
Retail  Payments  Board  (ERPB)  on  the  interoperability  of  instant  payment  solutions  for 
payments  in  shops  and  in  e-commerce12.  In  addition,  various  completed  or  ongoing 
workstreams under the auspices of the European Payments Council have the potential to add 
value  to  the  SEPA  Instant  Credit  Transfer  (SCT  Inst.)  Scheme,  to  improve  the  usability  of 
instant payment solutions and ultimately to support the uptake of instant payments.13 

11 Article 4(4) of Regulation (EU) No 260/2012 
12 Mobile-initiated end-user solutions and instant payment solutions at the point of interaction 
13 This includes for example the development of the ‘SEPA Proxy look-up’  and the ‘Request-to-Pay’  schemes, 
as well as functionalities such as ‘e-invoice presentment’ and ‘e-receipts’ 

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This work should be inclusive, involving all categories of PSPs, including Payment Initiation 
Service  (PIS)  and  Account  Information  Service  (AIS)  providers  and  other  relevant  players, 
which may not be payment services providers, such as providers of end-user interfaces  and 
user representatives.   

The  Commission  expects  broad  adherence  of  market  participants  to  the  Schemes  and 
recommendations  developed  by  the  Euro  Retail  Payments  Board  and  European  Payments 
Council. So far, payment  service providers have  not  taken advantage of some of the newly 
developed  Schemes,  e.g.  the  ‘SEPA  proxy-look-up’,  launched  by  the  European  Payments 
Council in 2019 and updated in June 2020. This enables customers to use their mobile device 
to transfer money from their payment account to the account of another individual in the EU 
without  manually  exchanging  payment  information  such  as  the  International  Bank  Account 
Number (IBAN).14 

A growing number of end-user payment solutions offer point-of-interaction15 (POI) payments 
relying, for example, on QR16-codes, Bluetooth (BLE) or Near Field Communication (NFC) 
technologies.  However,  QR-codes  are  not  standardised  at  EU  level,  which  restricts  their 
acceptance,  in  particular  for  cross-border  transactions.  In  addition,  payment  service 
providers’ access to Near Field Communication technology in mobile phones is restricted by 
some  providers  of  mobile  devices.  This  makes  it  difficult  for  providers  of  instant  payment 
solutions to offer merchants and consumers convenient and affordable solutions using unified 
QR-codes  as  an  alternative to  cards, or to offer  Near Field  Communication-enabled mobile 
payments.17 

The  Commission  considers  that  the  development  of  a  single,  open  and  secure  European 
standard for QR-codes would support the uptake and interoperability of instant payments. It 
therefore welcomes the ongoing work of the Euro Retail Payments Board working group on a 
‘Framework for instant payments at Point of Interaction’, carried out in cooperation with the 
European  Payments  Council  Multi-Stakeholder  Group  on  mobile-initiated  SEPA  credit 
transfers, and on a single standard for both merchant-presented and consumer-presented QR-
codes.18 

Key action: 

The  Commission  will  assess  whether  it  would be  appropriate  to  require  adherence  by 
relevant  stakeholders  to  all,  or  a  subset  of,  the  additional  functionalities  of  SEPA 
Instant Credit Transfer (SCT Inst.), which could also include any future standards for 
QR-codes. 

Interoperable infrastructures 

14 https://www.europeanpaymentscouncil.eu/what-we-do/other-schemes/sepa-proxy-lookup-scheme 
15 Encompassing both physical point of sale and e-commerce 
16 Quick Response 
17 See section 3 under the Third Pillar for more details 
18 https://www.europeanpaymentscouncil.eu/what-we-do/other-sepa-payments/sepa-goes-mobile/ad-hoc-
multi-stakeholder-group-mobile-initiated 

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Cross-border infrastructures for the clearing and settlement of instant payments already exist 
in  Europe,  but  full  interoperability  between  these  clearing  and  settlement  mechanisms 
(CSMs)  is  yet  to  be  achieved.  As  this  creates  a  clear  obstacle  to  the  uptake  of  instant 
payments in the EU, on 24 July 2020 the ECB announced measures to address these issues19. 
There  is  a  firm  expectation  that  clearing  and  settlement  mechanisms  and  payment  service 
providers will ensure timely implementation of these measures, before end-2021, in view of 
their legal obligation to be reachable EU-wide when providing instant payments. 

2.  Increasing consumers’ trust in instant payments  

The  quasi  real-time  availability  of  the  funds  on  the  payee’s  account,  combined  with  the 
irrevocability  of  payments,  may  have  implications  for  consumers  in  cases,  for  example,  of 
erroneous transactions, fraud20, etc. Instant payments may also present challenges in terms of 
money laundering, financing of terrorism, cyber-attacks, as well as operational and liquidity 
risks for financial institutions. If not appropriately identified and addressed, these risks may 
undermine  the  confidence  of  consumers  and  merchants  using  instant  payments,  potentially 
hindering their full rollout as the new normal. The Commission recalls that, when providing 
instant  payment  services,  payment  service  providers  must  ensure  that  they  have  in  place 
appropriate and real-time fraud and money laundering/terrorist financing prevention tools, in 
full conformity with existing legislation.  

In  order  to  be  more  attractive  to  consumers,  instant  payment  services  should  offer  features 
that  put  them  on  an  equal  footing  with  other  payment  instruments  (e.g.  cards)  that  offer 
chargebacks,  i.e.  the  return  of  credit  card  funds  used  to  make  a  purchase  to  the  buyer  in 
certain cases (e.g. mistakes). 

If instant payments are to become the new norm, the Commission considers that it would be 
appropriate that the charges of both  regular and  instant  credit transfers should  be the same. 
Otherwise, instant payments would remain a niche product, alongside regular credit transfers. 
On  the  other  hand,  it  is  clear  that  there  can  be  additional  costs  for  the  provider  if  some 
features and add-ons, such as chargebacks, are offered with instant payments. 

Key actions: 

In the context of the Payment Services Directive (PSD221) review22, the Commission will 
assess the extent to which the EU’s existing consumer protection measures (e.g. rights to 
refunds)  can  provide  consumers  making  instant  payments  with  the  high  level  of 
protection  offered  by  other  payment  instruments.  The  Commission  will  assess  the 
impact  of  charges  levied  on  consumers  for  instant  payments  and,  if  relevant,  require 
that they are no higher than those levied for regular credit transfers.     

The  Commission,  where  appropriate  with  the  European  Central  Bank  and/or  the 
European Banking Authority (EBA), will examine whether specific measures should be 

19 See Section 1 of the Third Pillar of this Communication for more details 
20 Such as the so-called ‘authorised push payments’ scams which, in the UK alone, resulted in £456 million 
(€504 million) of losses in 2019. 
21 Directive (EU) 2015/2366 
22 See Section 1 under Pillar 2 

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taken to enhance the effectiveness of the crisis management of payment systems, and to 
ensure  sound  mitigation  measures  on  the  liquidity  risk  for  financial  institutions 
resulting  from  the  rapid,  low-friction  outflow  of  funds  via  instant  payments,  in 
particular  when  taking  place  outside  normal  office  hours.    This  would  go  beyond 
central  bank  oversight  expectations,  mechanisms  under  the  Bank  Recovery  and 
Resolution Directive (BRRD)23 or the Single Resolution Mechanism Regulation (SRMR) 
or payment systems rules. 

The  Commission  will  also  investigate  whether  additional  measures  should  be  taken  to 
address other specific risks, such as money laundering, terrorist financing and related 
predicate offences. 

3.  European-grown payment solutions that work cross-border 

Completion of the key actions for facilitating instant payments, as identified in Sections 1 and 
2 of this Chapter, may not be sufficient to ensure the successful deployment of pan-European 
payment solutions. Additional actions may need to be taken for European actors to thrive in a 
landscape occupied by well-established incumbent competitors.  

New  actors  wishing  to  offer  pan-European  solutions  may  face  a  number  of  significant 
challenges:  

  acceptance by merchants and consumers;  
  customer recognition of new brands; 
  designing a competitive and innovative business model catering for differing national 

payment traditions and habits; 
financing costly infrastructures; and  
restrictions to access certain technical infrastructures or functionalities, etc.  

 
 

In addition, the strict conformity of governance and financing patterns with competition rules 
must be ensured.  

The Commission is fully aware of these challenges. Given the strategic nature of payments, it 
will  continue  to  play  an  active  political  role  to  foster  the  development  of  competitive  pan-
European  payment  solutions  that  rely  extensively  on  instant  payments,  and  to  address  the 
above challenges, in full compliance with EU competition rules.  

Key actions: 

By the end of 2023 the Commission will: 

•  explore  the  feasibility  of  developing  a  ‘label’,  accompanied  by  a  visible  logo,  for 

eligible pan-European payment solutions; 

23 Directive 2014/59/EU 

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•  explore  ways  to  facilitate  the  deployment  of  European  specifications  for  contactless 
card-based  payments  (CPACE)24,  e.g.  through  funding  programmes  such  as 
InvestEU, subject to the compliance with relevant eligibility criteria; 

•  support the modernisation and simplification of EU merchants’ payment acceptance 
facilities, enabling for example, cash registers to issue e-receipts. This support could 
be achieved through guidance and awareness-raising amongst retailers, particularly 
SMEs, about ways to modernise and digitalise25, including through the use of Digital 
Innovation Hubs.26 Funding and training possibilities will also be explored.  

The  Commission  will  also  continue  to  provide  guidance,  if  required,  to  ensure  that 
instant  payments  solutions  and  their  respective  business  models  comply  with  EU 
competition rules. 

4.  Reaping the full potential of the Single Euro Payments Area (SEPA) 

The  Single  Euro  Payments  Area  (SEPA)  was  created  to  make  all  cross-border  electronic 
payments  in  euro  as  easy  as  domestic  payments  by  harmonizing  the  way  cashless  euro 
payments are made across Europe.  

Today, six years after the end-date for SEPA Credit Transfers (SCT) and SEPA Direct Debits 
(SDD) in euro Member States, and four years after the end-date for non-euro Member States, 
many citizens still face unacceptable refusals of cross-border SEPA Direct Debit transactions 
(‘IBAN discrimination’). This means that they cannot use IBANs from a different country to 
make  a  payment.  Payees  are  still  often  unwilling  or  not  technically  able  to  accept  cross-
border SEPA Direct Debits. The Commission’s attention has frequently been drawn to cases 
of  tax  and  other  public  administrations  refusing  to  send  or  receive  payments  to  or  from  a 
foreign account. These cases of IBAN discrimination are a breach of the SEPA Regulation, as 
confirmed by established case law27. 

Even though the relevant competent authorities are required by law to monitor compliance by 
payment service providers with the SEPA Regulation, and to take action in case of a breach, 
they  do  not  always  adequately  and  systematically  address  such  breaches  of  SEPA  rules,  as 
evidenced by the many complaints received by the Commission services.   

Key action: 

The  Commission  reminds  national  competent  authorities  of  their  enforcement 
obligations  under  the  SEPA  Regulation.  It  expects  them  to  swiftly  investigate  and 
remedy all breaches to the Regulation by putting an immediate end to illegal activities 
and imposing appropriate sanctions. It will closely monitor cases of non-compliance and 
will launch any necessary infringement procedures.  

24CPACE is being developed as a result of some European card schemes having difficulties in accessing the 
contactless kernel developed by international card schemes - see section 3 of pillar 3. 
25 E.g. inspired by initiatives contained in the Small Retailers Guide https://op.europa.eu/en/publication-
detail/-/publication/d606c517-4445-11e8-a9f4-01aa75ed71a1/language-en 
26 https://ec.europa.eu/digital-single-market/en/digital-innovation-hubs 
27 Verein für Konsumenteninformation v Deutsche Bahn (C-28/18, EU:C:2019:673 (5 Sept. 2019) 

10 

 
 
 
 
 
 
                                                           
5.  Exploiting the potential of electronic identity (eID) for customer authentication 

As  financial  services  shift  progressively  from  traditional  face-to-face  business  towards  the 
digital  environment,  digital identity solutions  that can be  reliably used for remote customer 
authentication  become  increasingly  relevant.  PSD2  has  stimulated  innovation  in  this  area 
through  the  introduction  of  strong  customer  authentication  (SCA),  with  its  strict  security 
requirements for access to payment accounts and the initiation of digital payments. In some 
EU  Member  States,  electronic  identification  schemes  have  been  developed  for  customer 
authentication based on national electronic identification (eID) schemes offering the highest 
levels of assurance.  

However, the picture across the EU involves a plethora of different authentication solutions at 
national level with limited cross-border interoperability. This may hinder further innovation 
and the development of new payment services.  

With the eIDAS Regulation28, the EU introduced in 2014 a first cross-border framework for 
trusted digital identities and trust services. The aim of the Regulation is to facilitate access of 
all  EU  citizens  to  public  services  across  the  EU  by  means  of  eID  issued  in  their  home 
country.  The  experience  with  the  application  of  eIDAS  reveals,  however,  a  number  of 
structural  shortcomings,  which 
its  capability  of  effectively  supporting  a 
comprehensive  digital  ID  framework.  In  the  February  2020  Communication  “Shaping 
Europe’s  digital  future”,  the  Commission  committed  to  revise  the  eIDAS  Regulation  to 
improve  its  effectiveness,  extend  its  application  to  the  private  sector  and  promote  trusted 
digital  identities  for  all  Europeans.  The  intention  is  to  provide  a  future  proof  regulatory 
framework to support an EU-wide, simple, trusted and secure system to manage identities in 
the  digital  space,  covering  identification,  authentication  and  the  provision  of  attributes, 
credentials and attestations that will play a key role also in the payments field.  

restrict 

The Commission is determined to harness the potential offered by the rapid development of 
digital identity solutions in the financial sector. As set out in the digital finance strategy, the 
Commission  will  implement  by  2024  a  sound  legal  framework  enabling  the  use  of 
interoperable digital identity solutions that will allow fast and easy access of new customers 
to  financial  services.  This  will  facilitate,  as  part  of  such  solutions,  their  deployment  in 
payments, with a view to improving interoperability, efficiency, ease of use (especially across 
borders), and safety and security, in particular to reduce instances of fraud and other crimes.   

Key action: 

With a view to facilitating cross-border and domestic interoperability, the Commission 
will  explore, in close cooperation with  the EBA, ways to promote the use of electronic 
identity  (eID)  and  solutions  based  on  trust  services,  building  on  the  further 
enhancement  of  eIDAS,  to  support  the  fulfilment  of  Strong  Customer  Authentication 
requirements under PSD2 for account login and initiation of payment transactions. 

28 Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic 
identification and trust services for electronic transactions in the internal market and repealing Directive 
1999/93/EC 

11 

 
 
 
 
 
 
                                                           
6.  Improving the acceptance of digital payments 

The  Covid-19  pandemic  has  shown  how  important  it  is  that  digital  payments  be  widely 
accepted by merchants.  However, acceptance of  digital  payments varies significantly in  the 
EU.  There  are  still  many  entities  (merchants,  public  administrations,  hospitals,  public 
transports) which do not accept digital payments.  

The  Single  Digital  Gateway  Regulation  will  bring  strong  improvements.  It  will  facilitate 
online  access  to  the  information,  administrative  procedures  and  assistance  services  that 
citizens and businesses need to get active in another EU country. By the end of 2023, citizens 
and companies moving across EU borders will be able to perform a number of procedures in 
all EU member states without the need for any physical paperwork, like registering a car or 
claiming pension benefits.29 

The Commission expects Member States, in particular, to: 

- 

- 

- 

explore  and  address  the  reasons  for  reluctance  to  accept  digital  payments,  and 
encourage merchants to accept digital payments, including contactless payments;  
increase  the  digitalisation  of  government  payments,  beyond  those  covered  by 
Regulation (EU) 2018/1724; and   
equip public administrations, hospitals, etc. with terminals for digital payments.  

Key action: 

In  2022,  the  Commission  will  carry  out  a  study  on  the  level  of  acceptance  of  digital 
payments in the EU, including by SMEs and public administrations, and to explore the 
possible  reasons  in  case  of  a  low  level  of  acceptance.  If  appropriate,  it  may  propose 
legislative action.    

7.  Maintaining the availability of central bank money 

Cash accessibility and acceptance 

Cash is a means of payment that offers instant settlement in face-to-face transactions, without 
any technical infrastructure. It is still the only form of money individuals can hold directly. 
As such, it should remain widely accessible and accepted.  

In the euro area, euro banknotes and coins are the only legal tender pursuant to Article 128 
TFEU and to Council Regulation (EC) No 974/98 of 3 May 1998 on the introduction of the 
euro.  A  Commission  Recommendation  of  2010  explains  that,  where  a  payment  obligation 
exists, the legal tender of euro banknotes and coins implies:  

(a) 

(b) 

(c) 

mandatory acceptance by the creditor;  

at full face value; and  

with the power to discharge the payment obligation.  

29 Regulation (EU) 2018/1724 establishing a single digital gateway to provide information, procedures, 
assistance and problem solving services. 

12 

 
 
 
 
 
 
                                                           
The Recommendation also states that the acceptance of euro banknotes and coins as a means 
of payment in retail transactions should be the rule, and that refusals should be possible only 
on the basis of the “good faith principle” (e.g. if the retailer has no change available). 

Over the years, the use of non-cash means of payment has consistently increased in Europe30. 
However, cash remains the dominant means of payment in the euro area, where it is still used 
for 78% of all transactions31.  

The  statistics  for  cash  usage  conceals  a  wide  range  of  situations.  Some  euro  area  countries 
(Austria,  Germany  Ireland,  Slovakia  and  Slovenia)  have  a  marked  preference  for  cash. 
Estonia  and  the  Netherlands  are  situated  at  the  other  end  of  the  spectrum,  with  cash  being 
used  for  less  than  half  of  transactions  at  points  of  sale.  Outside  the  euro  area,  Sweden  is  a 
country where the use of cash has substantially decreased32. In all EU countries, the Covid-19 
pandemic  has  reduced  the  number  of  cash-based  transactions  during  lockdown,  but 
precautionary holdings of cash have actually risen markedly in some economies33.  

In practice, the availability of cash has decreased in recent years.34 Cases of non-acceptance 
of cash increased during the Covid-19 crisis, due to public concerns about viral transmission 
caused  by  handling  cash35  and  to  the  increasing  need  for  remote  transactions  generated  by 
lockdowns, which favoured a shift to digital payments. 

While promoting the emergence of digital payments to offer more options to consumers, the 
Commission will continue to safeguard the legal tender of euro cash. It is aware of and shares 
the  concerns  expressed  by  consumer  associations  that  there  is  a  tangible  risk  that  as  more 
services  are  digitalised,  those  without  access  to  digital  services  may  find  themselves  more 
excluded than they are today.36  There are still about 30 million adults in the EU who do not 
have a bank account37.  

In order to preserve access to and acceptance of cash, and its legal tender, the Commission: 

• 

Recalls  that,  as  legal  tender,  euro  banknotes  and  coins  must  be  accepted  by  the 
creditor at full face value where a payment obligation exists and they have the power 
to discharge the payment obligation. 

30 In 2018, the total number of non-cash payments in the Euro Area, comprising all types of payment services, 
increased by 7,9% compared with the previous year.  
31 https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op201.en.pdf 
32 According to the Riksbank, the proportion of those who paid for their most recent purchase in cash 
decreased from 39% in 2010 to 13% in 2018. 
33 “Central Banks and payments in the digital era”, BIS, June 2020 
https://www.bis.org/publ/arpdf/ar2020e3.pdf 
34 According to the ECB study on the “Use of cash by households in the euro area” (ECB occasional paper no 
201/November 2017) on average 5-6% of the surveyed participants in the euro area reported that it was (very) 
difficult to find an ATM or bank when needed. 
35 On viral transmission see for instance  
https://www.ecb.europa.eu/press/blog/date/2020/html/ecb.blog200428~328d7ca065.en.html 
36 BEUC, “Cash versus cashless: consumers need a right to use cash to use cash”, 
https://www.beuc.eu/publications/beuc-x-2019-052_cash_versus_cashless.pdf 
37 World Bank, Global Findex 2017 

13 

 
 
 
 
 
 
                                                           
• 

Expects Member States to ensure the acceptance and accessibility of cash as a public 
good,  in  line  with  Article  128  TFEU  and  Council  Regulation  (EC)  No  974/98  of  3 
May  1998  on  the  introduction  of  the  euro,  while  acknowledging  the  possible 
the  use  of 
legitimacy  of  duly 
disproportionate amounts of cash for individual payments that may be necessary, inter 
alia, in order to prevent the risk of money laundering, terrorist financing and related 
predicate offences, including tax evasion38. One means whereby Member States might 
preserve access to cash could be to provide for minimum coverage of automated teller 
machines (ATM), or equivalent means of access, on their territory.  

justified  and  proportionate 

limitations 

to 

Key action: 

In the framework of the Euro Legal Tender Expert Group (ELTEG), the Commission 
will take stock of latest developments regarding the acceptance and availability of cash 
within the euro area with the ECB, national central banks and treasuries.  

In parallel, it will closely follow the work on access to cash to be carried out under the 
auspices of the Euro Retail Payments Board. Taking this work into account, as well as 
the  deliberations  of  the  Euro  Legal  Tender  Expert  Group,  it  may  decide  to  take 
appropriate action to protect the acceptance and availability of euro cash at the end of 
2021. 

Central Bank Digital Currencies and further innovation in payments 

The decline in the use of cash, the increasing weight of private sector payment solutions and 
the  prospective  emergence  of  asset-referenced  tokens  have  led  central  banks  to  explore  the 
issuance  of  Central  Bank  Digital  Currencies  (CBDCs).  Depending  on  its  design,  a  retail 
CBDC can serve both as a digital substitute for cash and private payment solutions, as well as 
a driver for continued innovation in payments, ﬁnance and commerce, addressing speciﬁc use 
cases  in  our  increasingly  digitalised  economies  and  societies.  A  retail  CBDC  can  also 
enhance  the  international  role  of  the  euro  and  the  EU’s  ‘open  strategic  autonomy’,  and 
support  ﬁnancial  inclusion.  It  may  also  contribute  to  the  provision  of  resilient,  fast  and 
inexpensive payments, whilst enabling automated and conditional payments.   

As highlighted in the digital finance strategy, the Commission supports work by central banks 
(in  particular  the  ECB),  which  are  looking  into  the  possible  issuance  of  a  retail  CBDC 
available  to  the  general  public  (households  and  businesses)  while  safeguarding  the  legal 
tender  of  euro  cash.   This  work  complements  the  Commission’s  proposed  regulatory 
framework on asset-referenced tokens used for payment purposes.  

Further  work  is  needed  to  assess  the  potential  impacts  of  CBDC  on  monetary  policy, 
financial  stability  and  competition,  and  to  avoid  undue  disintermediation.  In  close 
coordination  with  the  ECB,  the  Commission  will  continue  to  work  to  foster  cooperation 
between the private and public sectors.  

Key action: 

38 For more information, see the Report from the Commission to the European Parliament and the Council on 
restrictions on payments in cash, COM(2018) 483 final. 

14 

 
 
 
 
 
 
 
 
 
                                                           
In  order  to  support  the  issuance  of  a  euro  retail  Central  Bank  Digital  Currency,  the 
Commission will work closely with the ECB on the objectives and policy options and on 
ensuring a high level of complementarity between the payment solutions developed by 
the private sector and the necessary intervention of public authorities.  

B.  Pillar 2:  Innovative and competitive retail payments markets 

1.  Reaping the full potential of  the Payment Services Directive (PSD2) 

The revised Payment Services Directive (PSD2) has enabled the emergence of new business 
models  based  on  the  sharing  of  payment  account  data  (‘Open  Banking’),  such  as  payment 
initiation  services  (PIS)  and  account  information  services  (AIS).  It  has  also  improved  the 
general  level  of  the  security  of  payment  transactions  through  the  implementation  of  strong 
customer  authentication  (SCA).  It  has  become  a  worldwide  reference  in  terms  of  open 
banking and secure transactions.  

In the wake of PSD2, more than 400 non-bank entities – third party providers (TPPs) – are 
now authorised to provide either payment initiation or account information services, and an 
increasing  number  of  banks  are  themselves  offering  account  information  services  and 
payment initiation services. However, the large potential of open banking still remains largely 
untapped. Two years after its entry into force the Directive has not yet yielded its full impact. 
Strong  Customer  Authentication  –  particularly  in  e-commerce  –  is  not  yet  fully  enforced, 
largely because of late or insufficient market preparedness. The uptake of regulated services 
based  on  access  to  payment  accounts  by  third  party  providers,  one  of  the  PSD2’s 
cornerstones,  still  poses  challenges  to  regulators  and  stakeholders.  The  existence  of  many 
different application programming interfaces (API) standards, which are key for efficient and 
secure  access  to  payment  accounts  data,  as  well  as  different  API  functionality  levels,  have 
presented  challenges  for  third  party  providers,  in  particular  those  that  were  already  in 
business before PSD2. These third party providers had to integrate and adapt their business to 
different technical specifications and customer journeys for accessing payment accounts.  

Given  the  magnitude  and  the  complexity  of  the  transition  required  by  PSD2,  these  early 
challenges  were  to  be  expected.  The  Commission,  the  European  Banking  Authority  (EBA) 
and national competent  authorities have been working  hard to  address and overcome them. 
Important  clarifications  have  been  given  via  more  than  100  responses  provided  to  Q&As 
submitted  by  external  stakeholders,  EBA  Guidelines,39  EBA  Opinions40,  clarifications 
provided  as  a  result  of  requests  made  by  members  of  the  EBA  Working  Group  on 

39 For example. see the EBA Guidelines on the exemption from the fall back mechanism under the RTS on SCA 
and CSC: https://eba.europa.eu/eba-publishes-final-guidelines-on-the-exemption-from-the-fall-back-
mechanism-under-the-rts-on-sca-and-csc  
40 E.g. the EBA Opinion on obstacles to the provision of third party provider services under the Payment 
Services Directive: https://eba.europa.eu/eba-publishes-opinion-obstacles-provision-third-party-provider-
services-under-payment-services   

15 

 
 
 
 
 
 
 
  
                                                           
Application Programming Interfaces41, and numerous meetings in which the Commission has 
sought to shed light and facilitate dialogues between various communities.42   

The Commission reaffirms its strong belief in the potential of open banking and is determined 
to make PSD2 a full success. The Commission will continue to work with the EBA to ensure 
that  illegal  obstacles  to  third  party  providers’  services  are  removed,  and  to  promote  a 
constructive dialogue between all stakeholders. In particular, it will support the finalisation of 
the  work  on  a  ‘SEPA  Application  Programming  Interfaces  Access  Scheme’  that  was 
launched in 2019 under the auspices of the Euro Retail Payments Board.  

Going  forward,  the  experience  gathered  from  the  full  implementation  of  PSD2  will  inform 
the  Commission’s  work on  a  broader  framework  for  open  finance,  as  set  out  in  the  Digital 
Finance Strategy. 

Key action: 

At  the  end  of  2021,  the  Commission  will  launch  a  comprehensive  review  of  the 
application and impact of PSD2.  

Building  on  the  PSD2  experience  and  as  announced  in  the  digital  finance  strategy,  it 
plans  to  present  a  legislative  proposal  for  a  new  ‘Open  Finance’  framework  by  mid-
2022. 

2.  Ensuring a high level of security for retail payments in Europe 

PSD2 requires all payment service providers to apply strong customer authentication (SCA) 
whenever  a  user  initiates  an  electronic  payment  or  accesses  their  online  banking  interface. 
Payment service providers across the EU have developed  authentication  solutions  based on 
the  use  of  two  or  more  elements  categorised  as  ‘knowledge’  (something  only  the  user 
knows), ‘possession’ (something only the user possesses) and ‘inherence’ (something the user 
is, e.g. biometrics).  

in  e-commerce  or  online 

Looking  to  the  future,  strong  customer  authentication  must  become  the  norm  when  paying 
travel  booking.  Payment  service  providers’ 
online,  e.g. 
authenticating  solutions  compliant  with  strong  customer  authentication  must  provide  users 
with  a  seamless  and  accessible  experience  to  access  their  payment  accounts  online  and  to 
facilitate the completion of transactions. They should rely on the most secure authenticating 
factors,  moving  away,  where  possible,  from  transmittable  elements  (e.g.  static  passwords) 
and from older technologies and communication channels that are prone to attacks (e.g. SMS 
text messages).  

41 See https://eba.europa.eu/regulation-and-policy/payment-services-and-electronic-money/eba-working-
group-on-apis-under-psd2 
42https://ec.europa.eu/info/sites/info/files/business_economy_euro/banking_and_finance/documents/19072
6-joint-statement-psd2_en.pdf  

16 

 
 
 
 
 
 
 
 
                                                           
As  new  types  of  fraud  keep  appearing,  strong  customer  authentication  alone  may  not  be 
enough  to  ensure  that  payment  service  users  remain  fully  protected.  Payment  service 
providers  should  always  be  at  the  cutting  edge  of  fraud  detection  and  prevention.  PSD2  is 
widely acknowledged to have enabled the EU and companies operating in the EU to become 
world  leaders  in  terms  of  operational  risk,  IT  security  and  major  incident  reporting,  partly 
thanks to the European Banking Authority’s Guidelines43. 

For  payments  posing  a  higher  fraud  risk,  the  Commission  will  assess  whether  requiring  a 
match between the beneficiary name and IBAN may be effective in preventing frauds, such 
as  ‘social  engineering’  where  people  are  manipulated  into  performing  actions  or  divulging 
confidential information.  

To  counter  phishing,  it  will  be  of  key  importance  that  EU  PSP’s  adopt  internationally 
recognized  controls,  such  as  Domain-based  Message  Authentication,  Reporting  and 
Conformance (DMARC)44.  

While  protecting  users  against  payment  fraud  is  vital  to  preserve  trust  in  payment  systems 
and in digital payments more generally, it is equally important that payment service providers 
do their utmost to protect themselves against cyber-attacks, as well as against any other man-
made and natural risks.  

It is equally important to ensure that the authentication approaches chosen by PSPs that rely 
exclusively on advanced technological devices do not lead to the exclusion of categories of 
customers, such as older persons.   

Key actions: 

In  close  coordination  with  the  European  Banking  Authority,  the  Commission  will 
carefully monitor the implementation of strong customer authentication requirements.  

In its review of PSD2, it will take stock of strong customer authentication’s impact on 
the level of payment fraud in the EU and explore whether additional measures should 
be  considered  to  address  new  types  of  fraud,  in  particular  with  regard  to  instant 
payments.  

Alongside the Digital Finance Strategy, the Commission is also proposing a Regulation 
on digital operational resilience for the financial sectors across the Union, with a view to 
enhancing  the  ICT  risk  management  of  various  financial  institutions,  including 
payment  services  providers.  This  initiative  is  consistent  with  the  European  Critical 
Infrastructure (ECI) Directive.45 

The Commission will work in close coordination with the European Banking Authority 
in order to draw on lessons learned from the implementation of the EBA Guidelines on 
ICT and security risk management, which have been applicable since June 2020.  

43 https://eba.europa.eu/regulation-and-policy/payment-services-and-electronic-money/guidelines-on-major-
incidents-reporting-under-psd2  
44 See https://dmarc.org/. DMARC is a way to make it easier for email senders and receivers to determine 
whether or not a given message is legitimately from the sender, and what to do if it is not. 
45 Which is currently being reviewed in order to enhance the protection and resilience of critical infrastructures 
against non-cyber related threats. 

17 

 
 
 
 
 
                                                           
3.  Fostering consumer protection 

The retail payments acquis aims to ensure that EU payment service users enjoy transparency 
and  security  when  paying  digitally.  However,  the  payments  market  continues  to  evolve 
rapidly, and further safeguards to protect consumers may be needed in the future.  

In addition to the initiatives announced in this Communication, which will improve consumer 
protection in payments, the Commission considers that the increased use of digital payments 
calls  for  further  reflection  on  payments  transparency,  as  well  as  on  the  features  of 
increasingly popular types of payments, such as contactless. 

Contactless payments 

At  the  outbreak  of  the  Covid-19  crisis,  following  the  European  Banking  Authority’s 
Recommendation,46  the  banking  and  payment  communities  in  most  EU  countries  increased 
the  maximum  value  for  contactless  payments  to  the  €50  limit  under  the  PSD2  regulatory 
technical  standards47.  Following  this,  the  number  of  contactless  payments  increased 
significantly.  

Having made greater use of contactless payments, in particular for health reasons, it is likely 
that  in  future  consumers  will  retain  this  habit.  That  would  be  a  positive  development. 
However the Commission does not consider it appropriate, at least at this stage, to raise the 
legal  maximum  (per  transaction  and  cumulative)  amounts  of  contactless  payments  without 
strong  customer  authentication.  In  the  absence  of  strong  customer  authentication,  there  is  a 
risk that an increase in contactless payments might be accompanied by a parallel increase in 
fraud. The impact of any increase to the limits would therefore have to be carefully assessed 
before any decision could be taken.  

Key action 

When  reviewing  PSD2,  the  Commission  will,  in  close  coordination  with  the  European 
Banking Authority, re-examine the existing legal limits on contactless payments, with a 
view to striking a balance between convenience and fraud risks. 

In the meantime, the Commission will examine, with both stakeholders and Member States, 
the technical conditions  that could enable consumers to set their own individual contactless 
limit  (subject  to the €50 maximum). The only choice that most consumers have today is  to 
whether  to  activate  or  disable  contactless  payments.  As  there  is  no  strong  customer 
authentication  for  contactless  payments,  consumers  are  in  any  event  protected  for  the  full 
amount. 

Enhancing the transparency of transaction statements  

As  the  payments  chain  of  actors  involved  in  a  single  transaction  becomes  longer  and  more 
complex, payment service users may find it increasingly difficult to identify to whom, where 

46 https://eba.europa.eu/eba-provides-clarity-banks-consumers-application-prudential-framework-light-covid-
19-measures  
47 COMMISSION DELEGATED REGULATION (EU) 2018/389 of 27 November 2017 supplementing Directive (EU) 
2015/2366 of the European Parliament and of the Council with regard to regulatory technical standards for 
strong customer authentication and common and secure open standards of communication 

18 

 
 
 
 
 
                                                           
and when they made a payment. This can lead to confusion, e.g. for instance where the name 
and place of the payment beneficiary in the transaction statement is not the commercial name 
of  the  company.  This  may  in  turn  make  it  more  difficult  for  consumers  to  spot  fraudulent 
transactions. 

The  Euro  Retail  Payments  Board  is  currently  tackling  this  issue  with  a  view  to  identifying 
solutions that allow users to more easily monitor their transactions.     

The  Commission  supports  the  Euro  Retail  Payments  Board’s  ongoing  work  on  enhancing 
transparency  for  retail  payments  users  and  will  take  account,  in  the  context  of  the  PSD2 
review, of any recommendations that the Euro Retail Payments Board makes in this area.  

4.  Future-proof supervision and oversight of the payments ecosystem 

As  highlighted  in  the  digital  finance  strategy,  the  financial  ecosystem  is  becoming 
increasingly  complex  with  a  more  fragmented  value  chain.  The  payments  chain  involves 
many  players  (some  regulated,  others  not)  and  increasing  levels  of  complexity  and  inter-
dependency. While regulation must guarantee a level playing field, promote fair competition 
and low barriers to entry and spur innovation, it must also uphold users’ rights and protect the 
overall  ecosystem  from  financial  and  operational  risks.  To  achieve  these  objectives,  the 
regulatory perimeter needs to be well balanced.  

While PSD2 implementation is still in its infancy, the E-money Directive (EMD2)48 has been 
in  force  for  over  a  decade,  so  there  is  sufficient  experience  to  draw  lessons  from  its 
implementation.  After  the  adoption  of  PSD2,  the  two  regimes  converged,  but  remained 
separate. The differences between the services provided by payment institutions and e-money 
institutions  no  longer  seem  to  justify  a  distinct  authorisation  and  supervision  regime  and 
could therefore be brought under a single framework. As the respective scopes of PSD2 and 
EMD2  exclude  certain  services  and  instruments,  it  is  also  important  to  ensure  that  any 
exemptions granted to businesses posing low risks remain justified.  

Need for a level playing-field between payment service providers  

In a world increasingly dominated by digital platforms, large technology providers are taking 
advantage  of  their  vast  customer  base  to  offer  front-end  solutions  to  end-users.  Their  entry 
into finance may consolidate the network effects  and their market power. As highlighted in 
the  digital  finance  strategy,  several  initiatives  have  emerged  involving  crypto-asset  service 
providers using distributed ledger technologies. These actors may provide payment services 
that  compete  with  those  offered  by  regulated  players  (e.g.  payment  service  providers, 
payment systems and payment schemes). They must therefore be regulated on the same basis 
in order to ensure a full level-playing field (‘same business, same risks, same rules’). On the 
one  hand,  they  may  broaden  the  range  of  available  payment  services  and  contribute  to  an 
innovative  market.  On  the  other  hand,  they  could,  if  not  properly  regulated,  supervised  or 
overseen, pose a threat to monetary sovereignty and financial stability. 

48 Directive 2009/110/EC of the European Parliament and of the Council of 16 September 2009 on the taking 
up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 
2005/60/EC and 2006/48/EC and repealing Directive 2000/46/EC (OJ L 267, 10.10.2009, p. 7). 

19 

 
 
 
 
 
 
 
                                                           
Over the years, competition issues observed in the payments sector related to access to data 
and information exchanges between competitors, as well as increased risks of foreclosure and 
abuse  of  dominance.  Such  risks  may  increase  further  through  digitization.  For  example, 
newly emerging digital financial services platforms may quickly acquire dominant positions 
or market power. Large technology providers can use their customer data and network effect 
advantages to enter the payments sector, leveraging their market power from social media or 
search  services.  As  part  of  its  competition  policy  enforcement  in  digital  markets,  the 
Commission  is  closely  monitoring  digital  developments  in  financial  services  and  enforcing 
EU competition law, where necessary, to promote competition and to prevent entry barriers 
in these markets. 

Supervision and oversight of the payments ecosystem 

Supervision  and  oversight  of  the  relevant  actors  in  the  payments  chain  has  become 
increasingly complex, taking into account the emergence of many new business models and 
group  structures.  The  potential  supervisory  implications  became  apparent  in  a  recent  case 
involving a technology company providing payment-related services.  

Payments  conglomerates  may  include  both  regulated  and  unregulated  entities.  Problems 
encountered  by  unregulated  entities  providing  technical  services  to  support  some  of  the 
Group’s  affiliates  could  potentially  have  a  spill-over  effect.  Recent  experience  has 
demonstrated that the bankruptcy of an unregulated entity can have tangible consequences for 
other  regulated  subsidiaries  (e.g.  freezing  of  the  institutions’  services  by  the  national 
competent authority).  

PSD2  does  not  currently  cover  services  provided  by  “technical  service  providers”  that 
support  the  provision  of  payment  services  without  entering  into  possession  of  funds  at  any 
time.49 As payment services increasingly rely on the provision of ancillary services by or on 
outsourcing  arrangements  with  unregulated  entities, 
it 
indispensable to  assess,  in  the context  of the PSD2 review, whether some of these services 
and  providers  should  be  brought  into  the  regulated  sphere  and  be  made  subject  to 
supervision50.  

the  Commission  considers 

Players in the payments chain may be under the supervision or oversight of different entities. 
The ECB and national central banks play a central role in the oversight of payment systems, 
schemes, instruments and their service providers. This complements the role of national and 
European  supervisors  in  supervising  payment  service  providers.  It  is  important  that 
supervisory  and  oversight  frameworks  are  coherently  structured,  taking  into  account  the 
dependencies between payment service providers, payment systems and payment schemes. 

Key actions: 

In order to address adequately the potential risks posed by unregulated services, ensure 
greater consistency in the various pieces of legislation on retail payments and  promote 
robust supervision and oversight, the Commission will: 

49 Article 3(j) 
50 This assessment shall take into account, inter alia, the EBA guidelines on outsourcing (EBA/GL/2019/02), 
which apply to all regulated payment service providers. 

20 

 
 
 
 
 
                                                           
• 

• 

• 

• 

as part of the Payment Services Directive (PSD2) review process, evaluate any new 
risks stemming from unregulated services, especially technical services ancillary to 
the  provision  of  regulated  payment  or  e-money  services,  and  assess  whether  and 
how  these  risks  can  best  be  mitigated,  including  by  subjecting  the  providers  of 
ancillary services or outsourced entities to direct supervision. This could be done 
by  bringing  certain  activities  under  the  scope  of  PSD2  where  justified.  The 
Commission  will  also  assess  the  adequacy  of  the  exemptions  listed  in  PSD2  and 
evaluate the need for changes in prudential, operational and consumer protection 
requirements;  

as  part  of  the  PSD2  review,  align  the  PSD2  and  E-Money  Directive  (EMD2) 
frameworks by including the issuance of e-money as a payment service in PSD2; 

in the proposal for a Regulation on Markets in Crypto Assets, subject issuers of e-
money tokens to additional provisions complementing EMD2.  

where  necessary,  ensure  proper  linkages  between  the  supervision  of  payment 
services and the oversight of payment systems, schemes and instruments. 

C.  Pillar 3: Efficient and interoperable retail payment systems and other support 

infrastructures 

1.  Interoperable payment systems and infrastructures 

Not  all  payment  service  providers  that  have  signed  up  to  the  SEPA  Instant  Credit  Transfer 
(SCT Inst.) Scheme, and are reachable domestically, are also reachable cross-border. This is 
both a violation of the SCT Inst. scheme rules and of Article 3(1) of the SEPA Regulation. 
This  is  due  in  part  to  the  lack  of  interoperability  between  clearing  and  settlement 
mechanisms.  Payment  service  providers  have  to  connect  to  several  (national  and/or 
European) clearing and settlement mechanisms and set aside and monitor multiple liquidity 
pools.  This  is  neither  ideal  nor  effective,  since  even  with  multiple  connections  they  cannot 
achieve full, pan-European reachability for SCT Inst. It is also costly due to the liquidity split 
between clearing and settlement mechanisms.  

The  operators  of  retail  payment  systems  should  therefore  ensure  efficient  interoperability 
between the systems. In 2019, the ECB announced that in the absence of satisfactory private 
solutions for interoperability issues, the Eurosystem would look at appropriate solutions51. On 
24 July 2020, it announced its decision to put in place measures ensuring pan-European reach 
for  euro  instant  payments  by  the  end  of  202152.  As  a  consequence,  all  payment  service 
providers  which  have  adhered  to  the  SCT  Inst.  Scheme  and  are  reachable  in  TARGET253 

51 Speech by B. Cœuré of 29 November 2019 
https://www.ecb.europa.eu/press/key/date/2019/html/ecb.sp191126~5230672c11.en.html 
52 https://www.ecb.europa.eu/paym/intro/news/html/ecb.mipnews200724.en.html 
53 TARGET2 is the real-time gross settlement (RTGS) system owned and operated by the Eurosystem.  

21 

 
 
 
 
 
 
 
                                                           
should also become reachable in a TARGET Instant Payment System (TIPS)54 central bank 
money liquidity account, either as a participant or as reachable party (i.e. through the account 
of another payment service providers which is a participant). 

The  Commission  fully  supports  these  proposed  measures,  which  are  necessary  to  ensure 
euro-area-wide  reachability  of  instant  payments,  help  payment  service  providers  to  comply 
with  the  SEPA  Regulation,  remove  liquidity  traps,  and  bring  benefits  to  all  clearing  and 
settlement mechanisms competing in the provision of instant payment services, which will no 
longer have to depend on reaching bilateral agreements to set up links.  

that  extending 

The  Commission  considers 
these  cross-border 
infrastructures from euro to other EU currencies is important to ensure pan-European instant 
payments.  It  therefore  expects  that  the  first  cooperation  agreement  to  allow  settlement  of 
instant  payments  in  non-euro  (Swedish  krona)  in  the  TARGET  Instant  Payment  System, 
which was concluded on 3 April 2020, will pave the way for solutions  that  facilitate cross-
currency instant payments. 

the  availability  of 

2.  An open and accessible payments ecosystem 

Access  to  payment  systems  is  essential  for  effective  competition  and  innovation  in  the 
payment  systems  market.  As  payment  and  e-money  institutions  compete  with  banks  to 
provide payment services and contribute to innovation in the payments market, it is important 
to guarantee that all players have fair, open and transparent access to payment systems.  

While  the  revised  Payment  Services  Directive  (PSD2)  requires  objective  and  non-
discriminatory  access  to  payment  systems  for  authorised  payment  service  providers,  the 
Settlement Finality Directive (SFD)55 makes access dependent on statutory criteria. This has 
prevented  e-money  institutions  and  payment  institutions  from  gaining  direct  access  to 
payment systems designated under the SFD.  

PSD2 requires Member States to ensure that direct participants (i.e. mostly banks) in an SFD-
designated payment system allow indirect access by non-bank payment service providers in 
an  objective,  proportionate  and  non-discriminatory  manner.  However,  indirect  access  via 
banks  may  not  be  the  best  option  for  many  non-bank  payment  service  providers,  as  this 
makes them dependent on those banks.  

The  Commission  is  aware  that  some  national  central  banks  have  allowed  payment  and  e-
money institutions direct or indirect  participation, subject to certain criteria. This has led to 
level playing field issues and further fragmented the payments market. As indirect access is 
the  only  option  in  systems  like  the  TARGET  Instant  Payment  System,  it  can  create 
unintended  effects  and  operational  challenges,  also  in  relation  to  compliance  with 
requirements on anti-money laundering and combating the financing of terrorism. In turn, this 
may distort the level playing-field between banks and non-bank payment service providers. 

54 TARGET Instant Payment Settlement (TIPS) is a market infrastructure service launched by the Eurosystem in 
November 2018. It enables payment service providers to offer fund transfers to their customers in real time 
and around the clock, every day of the year. 
55 Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in 
payment and securities settlement systems.  

22 

 
 
 
 
 
                                                           
Key action: 

In the framework of the Settlement Finality Directive (SFD) review (to be launched in 
Q4  2020),  the  Commission  will  consider  extending  the  scope  of  the  SFD  to  include  e-
money and payment institutions, subject to appropriate supervision and risk mitigation. 

3.  Access to necessary technical infrastructures 

The Commission believes that European payment service providers should be able to develop 
and  offer  to  all  European  users,  without  undue  restrictions,  innovative  payment  solutions 
using  all  relevant  technical  infrastructures,  under  fair,  reasonable  and  non-discriminatory 
terms and access conditions. 

The Commission is aware of a variety of situations in which some operators might restrict or 
block  access  to  necessary  technical  infrastructures.  These  may  include  a  range  of  software 
and hardware elements that are necessary if innovative payment solutions are to be developed 
and  offered,  e.g.  the  non-public  layers  embedded  in  mobile  device  operating  systems 
(including  Near  Field  Communication  antennae),  biometric  identity  readers  such  as 
fingerprint or face recognition scanners, app stores, point of sale kernels56, SIM cards, etc.57 

The most commonly reported issue relates to  some mobile device manufacturers restricting 
third  party  access  to  the  Near  Field  Communication  technology  embedded  in  smart  mobile 
devices.  The  Commission  has  recently  launched  competition  proceedings  to  examine  the 
conditions  for  access  by  third  parties  to  the  Near  Field  Communication  technology  of  one 
mobile device manufacturer.58  

Some  European  card  schemes  report  that  they  have  difficulties  in  accessing  the  contactless 
kernel in the point of sale terminals, which, for cross-border payments in Europe, is deployed 
by  international  card  schemes.  The  European  Card  Payment  Cooperation59  is  developing  a 
proprietary  kernel,  but  its  rollout  throughout  the  payment  chain  would,  according  to  the 
industry, will take several years.  

These  restrictions  could  result  in  significant  vulnerabilities  for  the  European  payments 
ecosystem, hindering  competition,  innovation and the emergence of pan-European payment 
solutions.  At  the  same  time,  unilateral  intervention  at  Member  State  level  could  lead  to 
market fragmentation and distort the level playing field. 

Key actions: 

In  parallel  with  its  ongoing  and  future  competition  enforcement,  the  Commission  will 
examine  whether  it  is  appropriate  to  propose  legislation  aimed  at  securing  a  right  of 
access  under  fair,  reasonable  and  non-discriminatory  conditions,  to  technical 
infrastructures  considered  necessary  to  support  the  provision  of  payment  services.  In 
doing so, it will take into account: 

56 A kernel is a set of functions that provides the processing logic and data that is required to perform a contact 
or contactless transaction in the payment application of a point of sale terminal.  
57 As identified by respondents to the public consultation preceding this strategy 
58 Case AT.40452 
59 http://www.europeancardpaymentcooperation.eu/ 

23 

 
 
 
 
 
                                                           
- the ongoing review of its competition policy to ensure that it is fit for the digital age;60  

- its ongoing work carried out on the Digital Services Act61 with regard to ex-ante rules 
for large online platforms acting as gatekeepers. 

Such  legislation  would  take  due  account  of  the  potential  security  and  other  risks  that 
such access could pose. In particular, it would lay down the criteria for identifying the 
necessary  technical  infrastructures  and  determining  to  whom  and  under  what 
conditions access rights should be granted.  

D.  Pillar 4: Efficient international payments, including remittances  

In Europe, regulation and industry efforts to achieve SEPA have drastically reduced the costs 
of  transferring  money  over  the  last  decade.  However,  payments  across  the  EU’s  external 
borders are slower, more costly, more opaque and more complex.  

Global  remittances  have  expanded  almost  six-fold  since  2000,  reaching  an  estimated  USD 
714 billion in 201962. This rapid growth has been largely driven by flows to low and middle 
income countries, which account for three quarters of the total. Together, the EU, the United 
States  and  Saudi  Arabia  are  by  far  the  main  source  of  remittance  flows  to  low  and  middle 
income countries, accounting for about two thirds of the total. 

For  low  and  middle-income  countries,  remittance  inflows  are  of  high  macroeconomic 
relevance,  representing  for  many  over  10%  of  their  GDP.  They  also  provide  an  essential 
financing lifeline for many recipient families and often act  as an informal social safety net, 
enabling 800 million family members (for whom remittances represent on average about 75% 
of  their  income)  to  pay  for  food  and  for  healthcare,  education  and  other  basic  needs.  As 
measured  by  the  World  Bank’s  Remittance  Prices  Worldwide  database,  the  global  average 
cost of remittances is still close to 7%, whereas the international community has committed 
to reducing those costs to less than 3% by 2030. As a consequence of the Covid-19 pandemic, 
remittances  are  projected  to  fall  by  about  20%  in  2020,  as  migrants  face  job  losses  and 
uncertainty. 

The  Commission’s  objective  is  for  cross-border  payments  involving  non-EU  countries, 
including remittances, to become faster, more affordable, more accessible, more transparent 
and  more  convenient.  This  will  also  encourage  greater  use  of  the  euro  and  strengthen  its 
position as a global currency. 

60 The Commission is currently reviewing the rules applicable to horizontal and vertical agreements, as well as 
the Market Definition Notice. Moreover, in June 2020 the Commission launched a public consultation in order 
to assess whether a New Competition Tool may be required in order to address structural competition 
problems that current competition rules cannot tackle in the most efficient manner. More information on 
these review processes can be found in the website for the Directorate General for Competition: 
https://ec.europa.eu/competition/consultations/open.html 
61 https://ec.europa.eu/digital-single-market/en/digital-services-act-package  
62 “Covid-19 Crisis through a migration lens”, Migration and Development Brief 32, Knomad, World Bank, April 
2020 

24 

 
 
 
 
 
 
                                                           
The main frictions affecting international  cross-border payments  were recently identified in 
the  Financial  Stability  Board’s  (FSB)  Stage  1  report  on  cross-border  payments63.  Taken 
together, these frictions create barriers for payment intermediaries seeking to provide cross-
border services, can increase prices for end-users, dampen investment in modernising cross-
border payment processes and also affect remittances. 

The  Commission  believes  that  a  mix  of  actions  at  global  and  jurisdiction-specific  level  is 
required. In line with the findings of the Committee on Payments and Market Infrastructures 
(CPMI)64,  these  can  be  broken  down  into  EU-specific  actions  and  actions  to  facilitate 
remittances.  

Key actions: 

- 

- 

- 

- 

- 

Where feasible, the Commission expects the relevant payment system operators, 
in  particular where  the  recipient  jurisdiction has  also  adopted  instant  payment 
systems,  to  facilitate  linkages  between  European  systems  such  as  TARGET 
Instant Payment System (TIPS) or RT165 and instant payment systems of Third 
countries  -  as  long  as  the  latter  benefit  from  an  appropriate  level  of  consumer 
protection, fraud and ML/TF prevention and interdependencies risks mitigation 
measures. The direct access of non-bank payment service providers to payment 
systems may increase the potential benefits of such linkages. Consideration could 
also  be  given  to  establishing  linkages  for  other  types  of  payment  systems, 
including retail and wholesale, where relevant, subject to similar safeguards. 
The Commission calls for the implementation, at the latest by end 2022, of global 
international  standards,  such  as  ISO  20022,  which  facilitate  inclusion  of  richer 
data in payment messages.  
In  order  to  further  increase  the  transparency  of  cross-border  transactions,  the 
Commission  encourages  payment  service  providers  to  use  the  Global  Payment 
Interbank  Financial 
Initiative 
Telecommunication  (SWIFT),  which  facilitates  the  tracking  of  cross-border 
payments  for  participating  institutions  in  real  time.  Wide  usage  of  the  tracker 
would  make  it  possible  for  originating  payment  service  providers  to  better 
estimate and disclose to the payer the maximum execution time of a cross-border 
payment.  The  Commission  will  assess,  in  the  framework  of  the  PSD2  review, 
whether  transparency  of  cross-border  international  transactions  needs  further 
improvements. 
As instant payments also become the norm internationally, the Commission will 
assess, in the context of the PSD2 review, the appropriateness of requiring that 
the  maximum  execution  time  in  ‘two-leg’  transactions  also  applies  to  ‘one-leg’ 
transactions66. 
The  Commission  is  following with  interest  the  ongoing work  carried  out  in  the 
further 
framework  of 

the  European  Payments  Council  on  possible 

for  Worldwide 

the  Society 

(GPI)  of 

63 Ibid 
64 https://www.bis.org/cpmi/publ/d193.pdf 
65 RT1 is a pan-European instant payment system owned and operated by EBA Clearing. 
66 The so-called ‘one-leg transactions’ are those transactions where either the payee’s or the payer’s payment 
service provider is located outside of the Union. 

25 

 
 
 
 
 
                                                           
harmonisation  of  business  rules  and  messaging  standards  for  one-leg 
transactions.  The  Commission  will  assess whether  it  is  necessary  to  make  these 
mandatory.  

Addressing specific issues affecting remittances:  

All  of  the  above-mentioned  strategic  actions  can  facilitate  cross-border  flows,  and 
therefore also benefit remittances. In addition:  

- 

- 

- 

The  Commission  encourages  Member  States’ 
initiatives  to  support  the 
remittance  sector,  subject  to  commitments  by  remittance  service  providers  to 
progressively reduce the cost of remittance services over time. 
The  Commission  will,  in  the  framework  of  EU  development  policy,  support 
SEPA-like initiatives in regional groupings of low and middle income countries, 
and in relevant cases the possibility for Third countries to join SEPA  (e.g. in the 
Western Balkans and in the Eastern Neighbourhood).   
The Commission will promote the access to payment accounts in low and middle-
income countries, which will also facilitate the digitalization of remittances.  

All these actions could support the international role of the euro by enhancing the ability of 
citizens  and  companies  to  use  the  euro  as  a  currency  for  person-to-person  transfers, 
investment, financing, and trade flows. 

IV. Conclusion 

This  strategy  identifies  key  priorities  and  objectives  for  retail  payments  in  Europe  over  the 
four  years  to  come,  based  on  extensive  input  from  all  stakeholders  and  taking  in  full 
consideration the outcome of the public consultation.  

To achieve these objectives, the Commission is committing to a number of important actions.  
The Commission encourages all stakeholders, at national and EU level, to engage actively in 
the implementation of this strategy.  

26