francois villeroy de galhau : card payments in europe – latest trends and challenges speech by mr francois villeroy de galhau, governor of the bank of france, at the bank of france conference “ card payments in europe – latest trends and challenges ”, paris, 18 january 2016. * * * ladies and gentlemen, dear yves mersch, dear mario nava, first and foremost, on behalf of banque de france, i would like to warmly welcome you all in paris. i am delighted to open this conference dedicated to card payments in europe. a large number of european actors involved in the card payments market are represented today, including regulatory authorities and market players, and i have no doubt that the debates that are going to take place will give us a valuable insight on the latest trends and the challenges they bring with them. before leaving the floor to our speakers and panelists, i would simply like to share with you a few thoughts on two of those challenges, one addressed to the supply side of the card payments market and one to the regulatory community. i. first challenge : the sustainability of the dominance gained by cards as payment instruments. will the most used payment instrument in europe continue to rise or will it fall? over the last decade, payment cards have steadily consolidated their dominance as the most used non - cash payment instruments in france and europe. in 2014, payment cards were used for more than 47 billion transactions in the european union, that is to say a level almost identical to the overall combined number of transactions involving credit transfers and direct debits, respectively the second and third most used payment instruments. in france, payment cards were used in more than 50 % of all non - cash payments transactions, amounting to nearly 9. 5 billion operations in 2014, compared to only 3 billion transactions in 2001. the specificity of card payments is that they occur for transactions of a relatively small amount ( 47€ in average in france ), making it the strongest alternative to cash for proximity payments. this situation is the result of years of efforts made by market stakeholders to build a secure, efficient and convenient payment instrument. the french community was at the forefront of such evolution with the early adoption in 1992 of chip for payment cards, which has been followed by the introduction and the subsequent widespread adoption of the emv standard. this latter evolution has been the cornerstone of the uptake of payment cards by allowing fast and secure transactions through europe. this predominance of payment cards may nonetheless

of the national strategy and feed the erpb with input from the french community. 2 ) in addition to their catalyst role, central banks through their oversight function should aim at ensuring that competition between market participants does not translate into a race to the bottom, but rather translate into a race to the top in terms of security, by setting high level objectives and by overseeing that they are complied with. indeed, while innovation is a promise bis central bankers ’ speeches and a vector for economic growth, it is also a door open to new threats for the very security of payments and public confidence in those. changes in the customers ’ usages generate new risks that may not be fully and comprehensively mitigated at the present time. i will only recall that card - not - present payments, though accounting for “ only ” a little less than 12 % of the overall value of card - based transactions in france, represent more than two - third of the overall value of fraudulent card - based transactions. european figures are similar. next generations solutions may begin to emerge to protect payments thanks to the works of the industry – i am thinking about the recent launch of dynamic cryptograms for example, as well as the use of biometrics –, but they also require time and action by the regulators. in this context, the adoption of the reviewed payment services directive in december 2015 represents a major achievement. this directive will considerably reinforce the security of payments and related services by setting in hard law and at the european level the obligation to use strong customer authentication for electronic payment transactions or payment account access. this directive also extends the scope of the european regulatory framework to new activities such as payment initiation or account information services. in this respect, it is a duty for public authorities to ensure level playing field between all market players, traditional actors or newcomers, through an overarching key principle : regulate according to the risk profile of the service, not according to the nature or status of the provider. banque de france has been, amongst european public authorities, a trailblazer on these security issues since the creation of the observatory for payment card security in 2001. this institution, chaired by the governor of banque de france since its inception, has anticipated and addressed through its works many of the challenges raised by new technologies, such as the security of remote or contactless payments or the use of biometrics as an authentication tool. nonetheless, in the current context of dramatic transformation of the retail payments market, it seems useful