EuropEan paymEnts BaromEtErthE nExt paymEntsrEvolution in EuropE.who will BE thE winnErs?
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CsC in touCh with CurrEnt trEnDsWithin the framework of its I.D.E.A.S programme (Inspiration, Debate,Executive, Annual Sur...
TABLE OF CONTENTS    1   summary                                                                                          ...
thE CsC-EFma paymEnts BaromEtEr aims    to assEss thE pErCEptions oF EuropEan    Banks anD CompaniEs oF thE potEntial    i...
EuropEan paymEntsBaromEtErThE FirST EurOpEAN SurvEy ON ThE impACT OF SEpA ANd ThE pSdAPPRoACH AnD METHoDoLoGy             ...
8
1thE nExt paymEntsrEvolution in EuropE.         EurOpEAN pAymENTS BArOmETErwho will BE        summarythE winnErs?         ...
SummAry     REguLATORy AND LEgAL CONTExT     towarD a     singlE Euro     paymEnt arEa      THE SinGLE EuRo PAyMEnTS AREA ...
THE GoALS oF SEPA                                            THE PSD, iTS oBJECTiVE AnD iTS SCoPEharmonisation of payment ...
5     RESuLTS     major     lEssons     lEarnED12
THE TWo EnGinES DRiVinG THE HARMoniSATion oF EuRoPEAn PAyMEnT SySTEMS, SEPA AnD PSD, WEREDESiGnED FoR THE BEnEFiT oF ConSu...
well as growth in revenues and a progressive unification of        it – that transaction prices will remain stable or may ...
DiFFEREnT CounTRiES, DiFFEREnT PoinTS oF ViEW  THE PoinTS oF ViEW oF BAnkS AnD CoMPAniES DiFFER ConSiDERABLy FRoM  onE Cou...
SEPA, ThE PSD AND TEChNOLOgICAL ChANgES     routEs oF     transFormation     BAnkS AnD CoMPAniES ARE inTEnSiFyinG THEiR EF...
SWIFTNet, and management of mandates for debtor banks         considerable importance to the development of new(in the B2C...
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2thE nExt paymEntsrEvolution in EuropE.         EurOpEAN pAymENTS BArOmETErwho will BE        tEstimonialsthE winnErs?    ...
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TESTiMoniALSsEpa toDay...anD tomorrow?Much has already been written about the implementation of SEPA, and certain points r...
"sEpa, a solutionstill looking For aproBlEm… "22
TESTiMoniALSphilippE CitErnEFORMER ChIEF OPERATINg OFFICERSoCiéTé GénéRALEFORMER PRESIDENT OF ThE PAyMENT SySTEMS STEERINg...
"thErE arE     rEgulatory     DEvElopmEnts     unDErway that arE     lEaDing to thE risE     oF truly EuropEan     Banks w...
The best analysis of the current situation with SEPA       AT A MoRE GEnERAL LEVEL, WHiCH MAJoRwas made by the European au...
"ChangEs, yEs –But no Big Bang."26
TESTiMoniALSgilBErt ErnstDIRECTOR AND MEMBER OF ThE ExECuTIVE COMMITTEESTATE AnD SAVinGS BAnk, LuxEMBouRG(BAnquE ET CAiSSE...
"towarD aharmonisED EuropE."28
TESTiMoniALSElizaBEth FrasErhEAD OF EuROPEAN DEVELOPMENTSuk PAyMEnTS CounCiLWHAT ARE THE kEy CHALLEnGES RELATED           ...
"sEpa is thE FuturE.... sinCE, asEvEryonE knows, paymEnt makEsthE worlD go rounD."30
TESTiMoniALSjosEF gilgErhEAD OF COMPETENCE CENTER PAyMENTS & SWIFTHyPoVEREinSBAnkWHy SEPA in REGARDS To A kEy FinAnCiAL   ...
"thE EuropEan paymEnts arEa isan iDEa that has ComE a long wayin twEnty yEars…But has yEt toBE FinalisED."32
TESTiMoniALShErvE sitruk CONSuLTANTMAnSiT SASyou HAVE CLoSELy FoLLoWED                                         WHAT WouLD ...
"sEpa will oFFEr asaFE, stanDarDisED anDCompEtitivE EnvironmEnt."34
TESTiMoniALSmarC tEmmErmanExECuTIVE VICE-PRESIDENTViSA EuRoPEWHAT ARE THE CHALLEnGES AnD THE DiRECT                       ...
36
TESTiMoniALSwhiChstratEgiEs willBanks DEploy?The banks have worked the hardest to pave the way for SEPA and the new Europe...
"ContaCtlEss paymEntCarDs or m-paymEnts:who knows whiChEuropEans willprEFEr?"38
TESTiMoniALSwilly DuBostPAyMENTS DEPARTMENT MANAgERBnP PARiBAS RETAiL BAnkinG FRAnCEWHAT ARE THE MAin CHAnGES unDERWAy    ...
"who will BE         WHAT’S GoinG To HAPPEn in niCE?     thE winnEr? thE      On May 21st the operation “Nice, NFC City” w...
41
"ContaCtlEss paymEnts, anDmorE spECiFiCally thosEmaDE By moBilE phonE, willunDouBtEDly play a majorrolE ovEr thE mEDium tE...
TESTiMoniALSEnriquE BarthESySTEMS BuSINESS DEVELOPMENT AND INNOVATIONDIRECTORBBVAWHAT ARE THE MAin CHALLEnGES To BE       ...
"paymEnts arE aunivErsal sErviCE. "44
TESTiMoniALSmarC CarlosDIRECTOR, PAyMENT SySTEMS AND SERVICESCRéDiT AGRiCoLE S.A.WHAT iS youR CuRREnT AnALySiS oF THE     ...
"opEning thE markEt to nEwplayErs will amongst othErspromotE Cost rEDuCtions."46
European Payments Barometer
European Payments Barometer
European Payments Barometer
European Payments Barometer
European Payments Barometer
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European Payments Barometer
European Payments Barometer
European Payments Barometer
European Payments Barometer
European Payments Barometer
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European Payments Barometer

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Next payments revolution in Europe. Who will be the winners?

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European Payments Barometer

  1. 1. EuropEan paymEnts BaromEtErthE nExt paymEntsrEvolution in EuropE.who will BE thE winnErs?
  2. 2. 2
  3. 3. CsC in touCh with CurrEnt trEnDsWithin the framework of its I.D.E.A.S programme (Inspiration, Debate,Executive, Annual Surveys). CSC carries out a number of “barometers”every year to analyse trends and perspectives from key roles within theboardroom (human resources, finance, IT, procurement…) at the Europeanlevel. Each of these studies, carried out with the assistance of independentsurvey institutions (IFOP and TNS Sofres), involve the participationof hundreds of managers from the largest businesses and publicadministrations in Europe. The results of these studies are revealed duringhigh level events, organized in different European cities (Paris, Madrid,Barcelona, Milan, Brussels, Lisbon, etc.), and are also relayed by partnersfrom the media (Les Echos, La Tribune, Expansion, Liaisons Sociales,Il Sole 24 ORE, etc.) and from academia (universities and elite schools). Opinions expressed by contributors are their own. Reproduction in whole or in part without written permission is strictly prohibited. © Copyright CSC 2010. All rights reserved. 3
  4. 4. TABLE OF CONTENTS 1 summary PAgE 9 10. REguLATORy AND LEgAL CONTExT. TOWARD A SINgLE EuRO PAyMENT AREA 12. RESuLTS. 5 MAjOR LESSONS LEARNED 16. SEPA, ThE PSD AND TEChNOLOgICAL ChANgES. ROuTES OF TRANSFORMATION 2 1 tEstimonials PAgE 19 21. SEPA TODAy... AND TOMORROW? 22. Philippe Citerne. Former chief operating officer - Société générale 26. Gilbert Ernst. Director and Member of the Executive Committee - State and Savings Bank, Luxembourg (Banque et Caisse d’Epargne de l’Etat - BCEE) 28. Elizabeth Fraser. head of European Developments - uK Payments Council 30. Josef Gilger. head of Competence Centre Payments & Swift - hypoVereinsbank 32. Herve Sitruk. Consultant - Mansit SAS 34. Marc Temmerman. Executive Vice-President - Visa Europe 37. WhICh STRATEgIES WILL BANKS DEPLOy? 38. Willy Dubost. Payments Department Manager - BNP Paribas 42. Enrique Barthe. Systems Business Development and Innovation Director - BBVA 44. Marc Carlos. Director, Payment Systems and Services - Crédit Agricole S.A. 46. Zélia Livramento. Director, Payment Systems - Caixa geral de Depositos (CgD) 48. Robert o Santos. Director of Business Development and Financial Control, Payments division - Banco Santander 50. Luca Vanini. head of group Payments Development - unicredit 52. Paolo Zanchi. head of e-money services, encashment and payments - Banca Monte dei Paschi di Siena 55. ThE SERVICES OF TOMORROW 56. Philippe Lemoine. CEO - LaSer 60. Daniela Manuello. Marketing Director - PosteMobile 62. Emmanuel Petit. Président et Directeur général - Mastercard France 64. Gilles Sabatier. Banking & Insurance Market Director - Orange Business Services 3 1 tns soFrEs rEsults PAgE 67 4 1 EFma rEsults PAgE 83 5 1 paymEnts: a stratEgiC ChallEngE For CsC anD its CliEnts PAgE 93 96. ThE CONTExT OF ThE PAyMENTS MARKET IS EVOLVINg RAPIDLy 98. CSC, WORLDWIDE PRESENCE, IN-DEPTh ExPERTISE5
  5. 5. thE CsC-EFma paymEnts BaromEtEr aims to assEss thE pErCEptions oF EuropEan Banks anD CompaniEs oF thE potEntial impaCt oF thE singlE Euro paymEnts arEa (sEpa) anD thE paymEnt sErviCEs DirECtivE (psD) on thE paymEnts markEt, as wEll as thE lEvEl oF prEparation oF thE main playErs For thEsE DEvElopmEnts.6
  6. 6. EuropEan paymEntsBaromEtErThE FirST EurOpEAN SurvEy ON ThE impACT OF SEpA ANd ThE pSdAPPRoACH AnD METHoDoLoGy TWo SuRVEyS Run in PARALLELThis is the first European survey measuring the impact To get a global picture, the TNS Sofres and Efma surveysof SEPA and the PSD. The survey was carried out in were conducted simultaneously, with specific methodscollaboration with the market research firm TNS Sofres and corroborating questions.and the European Financial Marketing Association(Efma) on a sample composed of roughly 100 decision • The TNS Sofres survey was carried out by interview;makers in European banks and companies and roughly • The Efma survey was carried out by way of an online100 member banks from more than twenty European questionnaire on the Efma website.countries. The questions focused on two types of impact:The questions that CSC and Efma sought to answer,drawn from responses to the TNS Sofres and Efma • The strategic impact of SEPA and the PSD onsurveys, are the following: European integration and on the payments market; • The operational impact of SEPA and the PSD on• Will SEPA and the PSD lead to harmonisation of the development of current and future payment European national regulations and to the elimination instruments, and on the market in general. of national barriers to payments markets?• What will be the impact of SEPA and the PSD on the future roles of the key players in the payments market, such as banks and credit institutions, payment TWo DiSTinCT METHoDoLoGiES institutions, retail and distribution companies, etc? TnS Sofres survey Will these two developments produce the expected effects? Approximately one hundred decision makers in banks• What will be the reaction of various players to SEPA and companies from eight European countries (Belgium, and the PSD? Will they anticipate these changes? Or France, germany, Italy, Luxembourg, Portugal, Spain and will they wait for these changes to take shape before uK) were interviewed: investing?• What changes will SEPA and the PSD bring about in • For banks, individuals were categorised according terms of payment services, projects, etc.? to their job functions for banking and means of payment: business line, back office and information technology. • For companies, companies were categorised into the following groups: retail and distribution companies; central or local administration; large public or semi-public financial institutions; large companies; and SMEs. Efma survey Approximately one hundred member banks from twenty European countries took part, represented by individuals holding thirty six different job titles, of which the most common were commercial, marketing and back office positions. The responses from these two surveys revealed significant and convergent trends. 7
  7. 7. 8
  8. 8. 1thE nExt paymEntsrEvolution in EuropE. EurOpEAN pAymENTS BArOmETErwho will BE summarythE winnErs? 9
  9. 9. SummAry REguLATORy AND LEgAL CONTExT towarD a singlE Euro paymEnt arEa THE SinGLE EuRo PAyMEnTS AREA (SEPA) iS A uniFiED EuRoPEAn PAyMEnT AREA iMPLEMEnTED By THE MEMBER STATES oF THE EuRoPEAn PAyMEnTS CounCiL (EPC). THE inTEnT iS To HARMoniSE ALL MEAnS oF MAkinG FinAnCiAL TRAnSFERS (inCLuDinG PAyMEnTS, WiTHDRAWALS, BAnk CARD TRAnSACTionS, ETC.), in EuRo (AS LEGAL TEnDER), BETWEEn MEMBER STATES.10
  10. 10. THE GoALS oF SEPA THE PSD, iTS oBJECTiVE AnD iTS SCoPEharmonisation of payment systems in the European union The Payment Services Directive (PSD) was adopted by therelies on the Single Euro Payments Area (SEPA), whose European Parliament on April 24th, 2007. It applies to allpurpose is to create a single payment area in euro, and on payments (except payments in cash or paper instruments)the Payment Services Directive (PSD), which provides the in all currencies within the European Economic Area (withnecessary legal framework for SEPA, establishing the new the exception of Switzerland). The PSD aims to strengthenrelationships between banks and their clients. the rights of users of payment services (notably consumers),The European Payments Council (EPC) has defined three to increase competition, and to reduce the price of paymentpan-European payment instruments within the SEPA transactions.framework that must eventually replace equivalent national This directive applies to six categories of payment servicespayment instruments: player, including one new non-bank player: the so-called• SEPA Credit Transfer (SCT), launched in France on payment institution, with its less burdensome status and with january 28th, 2009; strictly defined limits on the scope of its activities.• SEPA Direct Debit (SDD), implemented in some European countries since the PSD came into force on November 1st, 2009, while other countries – such as France – have postponed its implementation by one oBJECTiVES: SiMPLER, SAFER, MoRE EuRoPEAn year;• A payment card which corresponds to European As far as the European Commission is concerned, the expected debit and credit cards and which is the product of a gains from SEPA and the PSD would be numerous: philosophy different from that which created SCT and • For companies: a decrease in payment services prices; SDD. The system of payment by SEPA card must fit gains in productivity; economies of scale; improved within the European framework defined by the EPC European integration; and the development of the (called the SEPA Card Framework or SCF) to enable European market as the result of easier cross-border the user to make payments and withdraw cash under operations. the same conditions (in terms of technology, fees and • For companies in the retail sector: increased security of security) throughout the SEPA area. card payments. • For individuals: improved payment card acceptance by businesses throughout the SEPA area; increased competition among European service providers; management of all SEPA operations from a single account; and guaranteed rights throughout the entire SEPA area. • For banks: the streamlining of transactions at European level and the opportunity to develop value added services for their customers throughout the entire SEPA area. Europe, however, is a complex payment area, leading some to refer to the European ‘patchwork’ of payments, where each domestic market reflects the history and culture of the country. Some consider that these ambitious goals will take a long time to achieve, and that even with the euro, the creation of this new European payment area remains a considerable challenge. . 11
  11. 11. 5 RESuLTS major lEssons lEarnED12
  12. 12. THE TWo EnGinES DRiVinG THE HARMoniSATion oF EuRoPEAn PAyMEnT SySTEMS, SEPA AnD PSD, WEREDESiGnED FoR THE BEnEFiT oF ConSuMERS AnD CoMPAniES. THE PRoMoTERS oF THE PRoJECT AiM ToCREATE A EuRoPEAn PAyMEnT AREA By HARMoniSinG nATionAL REGuLATionS, DiVERSiFyinG THE PAyMEnTSERViCES MARkET By inTRoDuCinG MoRE PLAyERS in ADDiTion To BAnkS AnD CREDiT inSTiTuTionS,STiMuLATinG CoMPETiTion BETWEEn PLAyERS AnD REDuCinG THE PRiCE oF TRAnSACTionS. iT iSinTERESTinG To noTE THAT THE RESuLTS oF THE SuRVEy inDiCATE THAT, ConTRARy To ExPECTATionS,BAnkS AnD THE nEW PAyMEnT inSTiTuTionS WiLL PRoFiT THE MoST.1. pErCEpTiONSBAnkS AnD BuSinESSES: integration services providers. Banks have probably attached more importance to the emergence of new competitors, facilitated by SEPA and the PSD.DiFFEREnT PERCEPTionS Close to half of European banks expect strong competitionThe two surveys show that a significant gap exists between from payment institutions and anticipate the market share ofwhat banks and companies believe will be the impact of the international card schemes, in particular, will grow. A majoritytwo European harmonisation initiatives. of banks also expect a more important role will be played by private operators and software and systems integrationBeyond their divergent motivations and interests, it is clearly services providers.apparent that banks have generally taken action in responseto SEPA and the PSD while companies have done less; much Banks and companies are divided on the future of AChs andremains to be done in terms of disseminating information and PE-AChs in particular, and of the role to be played by retailraising awareness. and distribution companies. Companies believe these will play a larger role in the payments market than banks do.This partially explains the differences in their respectivevisions. A large majority of banks envisage SEPA and the PSD Finally, forty-three percent of banks envisage a decline inhaving a strong strategic and operational impact, while only the importance of national card schemes while forty percentone third of European businesses hold the same view, and it anticipate their importance will grow.is in fact precisely these companies that have sought to keepabreast of developments. On most issues, the opinions expressed by companies are the opposite of those expressed by banks! Companies had a decidedly more conservative outlook,2. pLAyErSPAyMEnTS MARkET: BAnkS ConVinCED oF envisaging few major changes. With the exception of some (very) large companies which make extensive use of payment/remittance services, they often adopt a ‘wait andTHEiR MiSSion, BuSinESSES STAnDinG By see’ attitude.The majority of European banks and companies believe thatthese developments will lead to regulatory harmonisation butnot to complete market unification, leaving national marketsintact. They show some scepticism towards the actual impactof SEPA and its benefits. Companies appear to be particularly 3. TrANSACTiONS STABLE TRAnSACTion VoLuMESsceptical even though they, along with consumers, should bethe principal beneficiaries. All respondents seem to consider that SEPA and the PSD will have no direct impact on transaction volumes andThreequartersofEuropeanbanksandtwothirdsofcompanies that growth in volume depends much more on growth ofconsider that these changes will not call into question the European trade. Their opinion and reasoning also appliesrole of banks in the payments market, and even consider to card transactions.that these changes will strengthen their role. The same is truefor national and international systems in place (ACh and PE- Nevertheless, within the global volume of transactions,AChs respectively), as well as for large retail and distribution banks forecast a continued decrease in volume for somecompanies. The opinions of banks and companies differ to a means of payment (cheques) and a decrease in domesticgreater extent regarding other players in the market, notably means of payment in favour of new SEPA instruments. Inthe new payment institutions, the national and international addition, banks are anticipating significant growth in cross­card schemes, private operators and software and systems border payments and remote bank payments/services, as 13
  13. 13. well as growth in revenues and a progressive unification of it – that transaction prices will remain stable or may the European market. even decrease as a result of the combined effects of harmonisation and unification of the market, and Companies share banks’ expectations for remote banking heightened competition (the famous ‘level playing field payments/services. They are however somewhat less advocated widely by European authorities) driven by enthusiastic than banks regarding the increased role of SEPA and the PSD. SEPA payment systems. Neither banks nor companies see significant changes ahead in the field of cash management. Respondents from different countries share the same opinions regarding remote banking and new payment instruments, but opinions differed on other issues. 5. iNvESTmENTS BAnkS WiLLinG To inVEST To GuARAnTEE A HiGH SERViCE LEVEL 4. BuSiNESS mOdELS inCREASED BAnkinG FEES ExPECTED By Banks acknowledge that beyond the probable decrease in the price of basic transactions, the arrival of new players will help to develop the range of services on offer and BuSinESSES improve the quality of those services. Even if it is not explicit in banks responses, it is clear that The need for operational excellence combined with the harmonisation of payments and the prices decreases the overhauling of business models, will doubtless induced by SEPA will have an impact on the business set in motion fundamental transformations which will models for transfers (as a result of SCT), for withdrawals necessitate significant modifications to operational (as a result of SDD), and for bank cards. The impact will procedures as well as major investments. vary for each market depending on the regulatory context of the country and the type of business model that was however, only a small portion of respondents seems in place. to recognise this fact, and to have understood the true extent of the transformation of the European payments Even if banks anticipate a drop in revenues from a decrease market and the investments that will be necessary. in volume of legacy payment systems (cheques and current transfers), they foresee an increase in revenues The investments will in particular be in future-safe payment from new means of payment, card issuance and cross­ systems, that is to say SEPA instruments (of which only the border flows. This is in all likelihood attributable to the purely regulatory characteristics are beginning to emerge overall increase in volumes and the new services which today), cross-border payments, remote payments, mobile will be built around the means of payment that eventually payments and, in general, the services related to means of remain. payment. Services and infrastructure linked to electronic payments will receive a large share of investments. The In any case, a major overhaul of business models and same holds true for security, credit and operational risk a quest for replacement revenues generated by new management and the fight against fraud. payment service offerings (and/or transformation of current payment services) are to be expected. In contrast to banks, the majority of companies The fact that some banks also expect growth in have adopted a ‘wait and see’ attitude. Only a third revenues from payment terminal management and cash of respondents are committed to taking the new management is more surprising. These developments European payments area into account. Most companies could, however, be the result of a significant increase in acknowledge – without having become actively involved cross-border transactions driven by SEPA and the PSD. in the matter – that some (in all likelihood significant) investments will have to be made. however, companies The banks acknowledge that the emergence of new are apparently waiting for banks to make the job easier, players, in particular payment institutions, will intensify although probably at additional cost to them. price-based competition. Curiously, banks anticipate such a strong decrease in prices that it is necessary to distinguish between the price of increasingly automated transactions (interoperability) which will fall, whereas value added payment services will generate replacement revenues and result in an overall increase in bank revenues. This explains why half of the companies surveyed anticipate an overall increase in payment services prices. The other half hope - though without really believing14
  14. 14. DiFFEREnT CounTRiES, DiFFEREnT PoinTS oF ViEW THE PoinTS oF ViEW oF BAnkS AnD CoMPAniES DiFFER ConSiDERABLy FRoM onE CounTRy To AnoTHER, REFLECTinG THE TRADiTionAL SCHiSMS WiTHin THE EuRoPEAn PAyMEnTS AREA. The uk is the only country in which a quarter of on harmonisation of regulations, the integration of respondents anticipates that SEPA and the PSD will not national markets, and shifts in the positions and roles have any impact on the payments market, and expects of various players in the payments market. These European diversity will remain, possibly for a long time. responses confirm the anticipation and dynamism Half of respondents expect, however, harmonisation of northern European countries and demonstrate of regulations without integration of national markets. somewhat unexpectedly the mobilisation of italy. This position is foreseeable in so far as the uk is not Finally, France has taken something of a middle part of the eurozone and is traditionally Eurosceptic. ground: nevertheless, a quarter of respondents envisage strong integration of national markets in Europe, • Two thirds of respondents were highly demonstrating that a minority in the British market sceptical about the impact of SEPA beyond the believe in the effects of SEPA and the PSD. harmonisation of regulations; • A minority of respondents believes there will in Germany and especially in Spain, respondents be strong or very strong market integration and do not anticipate strong European integration and considerable change in the positions and roles expect even less in terms of the integration of national of players in the payments market. markets. Both countries do, however, envisage harmonisation of regulations. Spain in particular The responses from the Central and Eastern European demonstrates a ‘wait and see’ attitude and scepticism countries surveyed confirm the expectations of the as regards the benefits of SEPA. The same is true for core European states as regards the impact of SEPA Germany albeit to a lesser extent. and the PSD. However, these countries do not share the same views of what the impact will be on the players in More than two thirds of respondents in the the payments market. This divergence is explained by netherlands, Luxembourg and italy, and one hundred the differences in maturity of payment systems in the percent of respondents in Belgium, anticipate a various markets. strong or very strong impact of SEPA and the PSD 15
  15. 15. SEPA, ThE PSD AND TEChNOLOgICAL ChANgES routEs oF transFormation BAnkS AnD CoMPAniES ARE inTEnSiFyinG THEiR EFFoRTS in THE AREA oF REMoTE PAyMEnT (ViA THE inTERnET) AnD on DEVELoPMEnTS in MoBiLE PAyMEnTS, ConTACTLESS PAyMEnT AnD PREPAyMEnT. TECHnoLoGiCAL innoVATion FACiLiTATES AnD EnCouRAGES EVoLuTion ToWARDS A ViRTuAL EuRoPE AnD THE RiSE oF nEW MoDES oF PAyMEnT. in THE LonG TERM, EuRoPEAn inTEGRATion oF PAyMEnT SySTEMS CouLD LARGELy BE THE RESuLT oF THE onGoinG DEVELoPMEnT oF REMoTE AnD MoBiLE PHonE PAyMEnTS. PREPARinG FoR CHAnGE transfers but also SDD withdrawals. The same is true for the opportunities for the development of cash management. Overall, banks are closely involved in the implementation Again, these responses can be explained by a lack of of new payment instruments, in particular SEPA direct information and proactivity as regards SEPA and the PSD debit (SDD), the new framework for consumer protection on behalf of many companies. and the PSD. Banks also envisage developing of cross­ border acquisition services. They have moved quickly For banks, the management of SDD mandates was an issue on implementing global standards for interbank flows. in 2009 and 2010 outside of France, and an issue for 2010 however, they do not hold the view that an overhaul of cash and 2011 in France, while companies are talking about 2011 management is necessary, a complex domain in Europe and 2012. and for which visibility is still limited. On the other hand, banks and companies are intensifying Most often, banks stress regulatory compliance and only their efforts in the area of remote payment (via the internet) rarely see the need to overhaul their offerings. and on developments in mobile payments, contactless payment and prepayment. Concerned by the outlook for game-changing transformation of payments systems, banks are willing Several large European banks have begun to align their to invest (to varying extents, depending on their size and product and service offerings with the needs of business current markets) in order to avoid losing ground to new (as determined by payment centres), and have begun to non-bank competitors. In general, at this stage investments develop European and even international service platforms. are being made in defensive projects focused on regulatory Even though the majority of banks still consider it important issues rather than in offensive and innovative projects such to develop these platforms in-house, the proportion that as new business models and services. A few bank and believe in common platforms and outsourcing commodity non-bank players are the exception, having laid the first processes to a private operator is growing (twenty-five significant foundations of a medium-term strategic vision. percent of respondents). Companies seem less involved in SEPA and the PSD, and Areas requiring technological development, ranked by have mobilised less, except in the area of e-commerce. priority, are: SEPA adaptations, including bank cards, Curiously, companies do not seem very interested in the and for creditors management of mandates, mass SCT, potential that SEPA and the PSD hold for payment and development of e-commerce for companies, bank/ collection centres, not only in terms of harmonisation of company interoperability and the development of EBICS/16
  16. 16. SWIFTNet, and management of mandates for debtor banks considerable importance to the development of new(in the B2C space). In some countries (such as germany) international standards for payment flows.and for certain players, depending on market practices,SDD in B2B is a high priority. All players in the payments market expect a strong increase in mobile phone payments, given the interest shown by consumers. Some telephone operators estimate that use of this means of payment by their customers could exceedTHE RiSE oF ELECTRoniC MonEy ninety percent. Many consumers don’t consider passing their mobiles in front of a reader to pay for small purchasesTechnological innovation facilitates and encourages (metro tickets, groceries, car park fees, etc.) to be anevolution towards a virtual Europe and the rise of new innovation because it comes so naturally to them.modes of payment. In the long term, European integration ofpayment systems could largely be the result of the ongoing Although mobile phone payments may replace cashdevelopment of remote and mobile phone payments. transactions (which are costly for banks), they threaten revenues generated by bank cards, which is a very popularThe TNS Sofres and Efma surveys demonstrate that banks product in Europe. Defining the model for revenue sharingand companies anticipate the growth of e-money. between banks and mobile telephone operators is therefore a very sensitive issue.until now, banks have not seemed in a hurry to implementthese service offerings. According to the Efma, the mobile When mobile telephone operators and banks finally dophone was not perceived as a tool for securing new reach an agreement – which is the case in France – thecustomers; a ‘wait-and see’ attitude was prevalent among volume of mobile payments should then expand rapidly.banks, which preferred to prioritise the development ofinternet banking.Internet use and mobile technologies are becoming mature.All large banks offer internet based payment services, theuse of which has now become widespread. Now, in additionto remote payment, banks are encouraging contactlesspayment and prepayment. Banks are expecting stronggrowth in these means of payment and thus attach 17
  17. 17. 18
  18. 18. 2thE nExt paymEntsrEvolution in EuropE. EurOpEAN pAymENTS BArOmETErwho will BE tEstimonialsthE winnErs? 19
  19. 19. 20
  20. 20. TESTiMoniALSsEpa toDay...anD tomorrow?Much has already been written about the implementation of SEPA, and certain points remain thesubject of lively debate. Where do we stand today? What are the critical issues that still have tobe resolved? And what will be the consequences? Six insiders familiar with the dossier addressthese questions and provide an overview of what might change in concrete terms on the Europeanpayments scene. "SEPA, a solution still looking for a problem…" PHiLiPPE CiTERnE Former chief operating officer - Société Générale Former president of the payment systems steering committee - French Banking Federation (Fédération Bancaire Française) "Changes, yes – "Toward a harmonised Europe." but no Big Bang." ELiZABETH FRASER GiLBERT ERnST head of European Developments Director and Member of the Executive Committee uk Payments Council State and Savings Bank, Luxembourg (Banque et Caisse d’Epargne de l’Etat - BCEE) "SEPA is the future.... since, as "The European payments area is everyone knows, payment makes an idea that has come a long way the world go round." in twenty years…but has yet to be finalised." JoSEF GiLGER head of Competence Center Payments & Swift HERVE SiTRuk HypoVereinsbank Consultant Mansit SAS "SEPA will offer a safe, standardised and competitive environment." MARC TEMMERMAn Executive Vice-President Visa Europe 21
  21. 21. "sEpa, a solutionstill looking For aproBlEm… "22
  22. 22. TESTiMoniALSphilippE CitErnEFORMER ChIEF OPERATINg OFFICERSoCiéTé GénéRALEFORMER PRESIDENT OF ThE PAyMENT SySTEMS STEERINg COMMITTEEFREnCH BAnkinG FEDERATion (FéDéRATion BAnCAiRE FRAnçAiSE)you HAVE FoLLoWED THE CouRSE oF cases. In matters of payments, fraud and moneySEPA SinCE iT STARTED. TAkinG A BRoAD laundering, the devil is in the details. This verificationViEW, HoW Do you EVALuATE THE will take a great deal of time. Add to this the factPRoGRESS MADE in THE PAST yEARS? that the European Commission continues to think that payments can be entrusted to companies thatThe matter was approached in the wrong way from are not recognised as banks and subject to very littlethe beginning. It all started in Brussels with the intent regulation. The very cautious attitude taken by certainto reduce the cost of cross-border transactions. There consumer protection associations in countries wherewas clearly work to be done: with locally focused existing guarantees and legal systems are very solid ispayment systems, cross-border payments were costly thus highly understandable.for banks and expensive for customers. however, oneminor consideration remains: in France, cross-border WHAT iS THE SiTuATion ToDAy?payments represent only 5% of financial flows. Theidea was then that by making all domestic payments We’re in a strange situation. According to thehomogeneous, by definition, cross-border payments Commission, the use of SEPA products should enablewould cease to be a problem. Rather than moving the colossal saving. The Commission also asserts that thestool, let’s move the whole piano! And bit by bit SEPA legal environment will be harmonised and consumerswas presented as the logical consequence of the move will thus have nothing to fear. you can lead a horse toto the euro, whereas the problem of payments systems water, but you can’t make it drink – SEPA instrumentsis much more complex. are only being used sporadically. Today, confronted by the failure of the launch, Brussels intends to make thein WHiCH WAyS ARE PAyMEnT SySTEMS use of these supposedly beneficial products obligatoryCoMPLEx SERViCES? by a specific date in order to force the adaptation thereof, as opposed to gradually phasing them in asThey imply a high level of trust between debtors, was originally planned.creditors and banks, taking into account the credit riskand risk of fraud involved. For centuries banks and their WHAT ARE THE PoSiTionS oF THEcustomers have managed these problems in a variety VARiouS PLAyERS in THE CuRREnTof legal environments and different behaviours in terms DiSCuSSionS?of means of payment. The germans prefer to pay incash with larger bank notes which French businesses Several major operators (in the retail, petrochemicalrefuse to accept; the French are avid users of cheques and telecom sectors, for instance) have an economicwhich are free of charge. The simplest problem of the interest in having access to efficient “paymentsconversion to the euro as legal tender was above all factories”. Many consumers however do not trusta logistical one: making bank notes available. The real withdrawals from their accounts made by non-bankdifficulty is to implement non-cash payment systems enterprises based in countries with legal systems theyat a European level. In the case of SEPA, the opposite judge to be less safe than their domestic market. Andanalysis was made, which may even be its downfall. many banks don’t know whether they will be able to make the major investments required. The majorityBuT THE PSD HAS HARMoniSED of other players, predominantly businesses, do notREGuLATionS… understand why they should invest in the burdensome redesign of their internal systems in the absence ofThat was done in a somewhat hurried fashion after clear benefits in these times of crisis. In the languagehaving defined two products, whereas that should of Brussels, most parties involved have yet to presentclearly have been the starting point. It now remains their ‘business case for SEPA’, and furthermore theto verify in practice that these rules are identical in Commission is refusing to validate a coherent set ofevery country and that in every country the means of principles to govern fees…recourse are the same, and not almost thirty different 23
  23. 23. "thErE arE rEgulatory DEvElopmEnts unDErway that arE lEaDing to thE risE oF truly EuropEan Banks within thE EurozonE, aCtivE in rEtail Banking in sEvEral CountriEs." BASiCALLy you’RE SAyinG iT’S DouBLE oR When speaking of double or nothing, ‘nothing’ means noTHinG. WHAT HAS To BE DonE ToDAy taking a coercive approach which seeks to impose To MAkE SEPA A REALiTy? products that are not bought, and to continue along the current path. ‘Double’ on the other hand means Over the long term, everyone agrees on the need for the recognising the error in the initial approach combined rise of European payment systems, some of which will with project management that would doom any probably use new techniques. But the problem is not to undertaking to failure. It’s necessary to take the laboriously design one or two means of payment. The only time to define ambitious, long-term objectives for a viable approach is to think in terms of payment systems. European payments system. A project should then be It’s thus appropriate to clarify the long-term characteristics launched and managed professionally (business case, of a European payment system. In this context, let’s try programming, alternative solutions, milestones, etc.), to envisage a state-of-the-art European payment card with robust governance and a focus on sustainability. suitable for a continent which invented the chip card, but This certainly implies a greater role for central banks, which risks losing its pride of place in this domain, and whose expertise in the matter is both extremely having to resign itself to a non-European oligopoly (in this longstanding and natural. We should of course also regard, we can ask ourselves today whether the originally define the rules to govern fees, such that the various European approach taken to the gSM standard has thus players can determine their position, while at the same been validated). Let’s also think about technologically time finding pragmatic ad hoc solutions for cross­ innovative European payment systems (again, take the border payments and for high volumes of withdrawals example of the gSM). These would be projects for Europe by limiting things to the eurozone at first. worthy of the Lisbon Treaty.24
  24. 24. The best analysis of the current situation with SEPA AT A MoRE GEnERAL LEVEL, WHiCH MAJoRwas made by the European authorities in November DEVELoPMEnTS Do you ExPECT in THE2009 when comparing the launch of the SEPA products WoRLD oF BAnkinG?to that of the Cutty Sark in 1869, the best clipper shipever built, and given its performance, destined totransporting tea. however in addition to its technicalexcellence, it is worth remembering that the cost of There are regulatory developments underway that arebuilding the ship ruined the shipyard, and that during leading to the rise of truly European banks within theits maiden voyage it lost its rudder and was roundly eurozone, active in retail banking in several countries; atbeaten by an existing ship (the Thermopylae wasn’t least two such institutions can already be found in thisinvented just like that…). Furthermore, the Suez Canal category. They are of course interested in centralisingwas opened in the same period in parallel with the the management of payments. Assessing the actions ofdevelopment of steam propulsion. The Cutty Sark had these players and the progress of SEPA is a questionto be rapidly withdrawn from tea transport as it was akin to that of which comes first, the chicken or the egg?no longer competitive. There too, the amount of time And it is by providing a general long-term frameworkspent on the business case was clearly insufficient. for payments in Europe that progress will be made,We may not be at that stage yet, but the example rather than by imposing one or two more or less viablegiven by the European authorities certainly gives products here and there.pause for thought. 25
  25. 25. "ChangEs, yEs –But no Big Bang."26
  26. 26. TESTiMoniALSgilBErt ErnstDIRECTOR AND MEMBER OF ThE ExECuTIVE COMMITTEESTATE AnD SAVinGS BAnk, LuxEMBouRG(BAnquE ET CAiSSE D’EPARGnE DE L’ETAT - BCEE)LuxEMBouRG iS APPAREnTLy AHEAD in of SCT and SDD. I think this is overambitious. It wouldTERMS oF THE iMPLEMEnTATion oF SEPA? be better to explain to those involved the advantages of payments harmonisation, then draw up a strict but realistic timetable and move forward. That’s the challenge, in essence: do it!Being a small country has advantages and disadvantages.Our cost per transaction is high if we stay in a domestic WiLL THE CHAnGES CuRREnTLy unDERWAysystem with insufficient critical mass, which sometimes MoDiFy THE WAy in WHiCH PLAyERS inmakes it necessary to migrate to more global standard THE BAnkinG SECToR inTERACT?systems. We were forerunners when it came towidespread implementation of IBAN and BIC, in 2004, There will be changes, yes – but not major disruption.with a single structure for both domestic and cross­ Banks will have to coexist with many new players (suchborder operations. In 2005, we made the EMV card as Paypal and others), but they have many strengths tostandard the norm, and in 2006 we migrated our entire draw upon. Businesses will benefit from this increasednational clearing house system to STEP2, a PEACh competition, multinationals in particular, as it willsolution managed by EBA. Today 90% of the payments facilitate their cash management operations. As regardsmade in Luxembourg comply with the SCT standard – local businesses and individuals, they will benefit fromversus only 6.2% in Europe. increased transparency and lower costs in the market.WHAT ABouT WiTHDRAWALS AnD THE WHiCH oTHER CHAnGES Do you ExPECT?SEPA CARD? There will clearly be increased impetus for theBoth these paths are scattered with pitfalls. A deadline development of e-banking. Security is still a challengeof November 2010 was set for SDD, but taking into for large sums, but clients are beginning to becomeaccount the numerous local particularities (especially accustomed to online services, and e-invoicing inwhere mandate management is concerned) I doubt it particular looks set to enjoy a bright future.will be respected. In addition, our Scandinavian colleagues are quick toAnd as for cards, numerous countries have debit point out that SDD instruments are somewhat obsolete,card systems that function well, such as Bancomat in having already been overtaken by electronic payments.Luxembourg. Will we abandon our system in 2012 for however, I don’t think that SDD will be replaced in a ‘Bigan international or European standard? At this time no Bang’ manner; the two systems will doubtless coexist forstandard is the clear leader. We may decide to keep our some time yet. Whatever happens, the EPC will almostsystem, by making it SEPA compatible. certainly have to take electronic payments increasingly into account in its thinking.WHAT iS THE GREATEST CHALLEnGE youARE FACinG AT THiS TiME?On the one hand, a regulatory challenge which consistsof striking the right balance between competition andtransparency. On the other, a fair balance and peacefulcoexistence between market forces and regulatorybodies which is indispensable. The parties involvedall need each other if SEPA is to become a reality. Forexample, the new European union commissioner hasset the deadline of 2012 for widespread implementation 27
  27. 27. "towarD aharmonisED EuropE."28
  28. 28. TESTiMoniALSElizaBEth FrasErhEAD OF EuROPEAN DEVELOPMENTSuk PAyMEnTS CounCiLWHAT ARE THE kEy CHALLEnGES RELATED and holiday makers should see their cards even moreTo THE iMPLEMEnTATion oF THE PSD AnD widely accepted. From a uK perspective, we have alsoSEPA? been looking at whether elements of the SEPA Schemes should be adopted domestically.SEPA underpins the European Commission’s vision of aSingle Market, requiring a harmonisation of euro payment WHAT WiLL BE THE PRoBABLEsystems (scheme rules, procedures and standards) across DEVELoPMEnTS in THE CoMPETiTiVEEurope and, ultimately, the closure of domestic euro retail LAnDSCAPE?schemes. yet the existence of SEPA does not drive anintra-Europe demand for goods and services, it simply The PSD aims to encourage non-banks to enter thefacilitates payment on a pan-European basis. New SEPA payments market so this should mean more innovationpayment schemes have been developed via a consensus and choice for consumers.approach through the European Payments Council. From WHAT WiLL BE THE PRoBABLEan implementation perspective, that inevitably means that ConSEquEnCES oF THE MARkET BEinGpayment service providers and end users must accept oPEnED uP To nEW PLAyERS?change and compromise – something which is never easy.Two years after the launch of the SEPA Credit Transfer greater competition, leading to niche developments andScheme, only about 6% of euro credit transfers have a need for players to differentiate themselves via value­migrated. The industry and a number of stakeholders are added services and innovative solutions. This shouldnow calling for the Commission to set a SEPA migration mean more choice for end users.end date through a binding Regulation, something whichthe regulator is investigating. WHAT WiLL BE THE iMPACT oF SEPA on BuSinESS MoDELS?PSD was a challenge in that it is a maximum harmonisationdirective, yet contains many Member State derogations. Corporates and small businesses can rethink their businessThis meant that the industry really had to work together, models by considering opportunities for expanding into aand with their respective finance ministries, to ensure that wider European market.it was implemented across the EEA in as consistent a wayas possible. WHAT oTHER CHAnGES Do you ExPECT (in TERMS oF TECHnoLoGy, CAPABiLiTiES,WHAT WiLL BE THE PRoBABLE DiRECT AnD ETC.)?inDiRECT iMPACT on PAyMEnT METHoDS inTHE MARkET? We expect there to be a continued focus on interoperability and the adoption of global, open messaging standards.SEPA defines an integrated euro payments market so, Other regions across the globe are picking up on thefrom a eurozone perspective, current domestic retail SEPA concept. For example, the International Paymentspayments will migrate to the SEPA Schemes. What we Framework (IPF) Association is currently in the processare already seeing, even with the SEPA Schemes, is that of finalising the IPF Credit Transfer Rulebook (based ondifferent ‘flavours’ are emerging. For example, in addition the SEPA Credit Transfer Rulebook and Implementationto the Core SEPA Direct Debit Scheme, the EPC has also guidelines) and has established mapping rules betweendeveloped a Business-to-Business Scheme and a Fixed SEPA Credit Transfers and dollar credit transfers used inAmount Scheme to suit specific customer requirements. the uS.For end users, larger corporates should find it easier tooperate on a pan-European basis and to rationalise theircash management and card acceptance arrangements.It will be simpler for individuals working or studyingabroad, or maintaining an overseas property, to transferof funds between countries, while business travellers 29
  29. 29. "sEpa is thE FuturE.... sinCE, asEvEryonE knows, paymEnt makEsthE worlD go rounD."30
  30. 30. TESTiMoniALSjosEF gilgErhEAD OF COMPETENCE CENTER PAyMENTS & SWIFTHyPoVEREinSBAnkWHy SEPA in REGARDS To A kEy FinAnCiAL SEPA wont really create huge advantages for the privatePLAyER SuCH AS HyPoVEREinSBAnk? person. For corporations however, it will be a major leap. Take a company like Vodaphone which today has 5 to 10hypoVereinsbank in germany, is part of uniCredit. This means banks in each country to handle its payments. With SEPA,we share common streams but as, with all national banks, we they will be able to have just one payment hub and processstill have our own products, processes and providers. And their payments through only a few banks across all of Europe.this is normal, since Europe is made up of separate countries, And they will be playing the competition saying “We havewith distinct laws, different systems for legal reporting and 5 billion transactions, whats your price?” Another exampledistinct national banking licences etc. is the Eu Commission, which only uses 4 banks today, as compared to 17 banks in the previous years! One of the 4Europe is not operating in a unified banking system such banks is uniCredit!as the united States for example. So there is no centralregulation for banks for the time being. Payment however, WHAT WiLL BE THE iMPACT oF SEPA on THEwhich is only a small part of banking, is another issue. And BAnkinG SCEnE?SEPA is actually a payment scheme developed by banks inanswer to a requirement by the European government. The It will change the worlds banking landscape, making itgoal is to have one integrated financial market in Europe... harder for small banks and more competitive for the largersince, as everyone knows, payment makes the world go entities. Some will lose transaction volumes, some will gain,round. which is all in line with the European Parliaments will to have more competition. Already the PSD (Payment ServiceSo SEPA STEMS FRoM A Eu GoVERnMEnT Directive) has changed the rules of the payment game. InREquEST... DiD BAnkS RuSH To DEVELoP THiS the scope of the national direct debit scheme, prices fornEW PAyMEnT SCHEME? direct debit throughout Europe can range from zero, ie free, to up to 9 Euros for the same product and service whichNot at first. In fact they stalled quite a bit until faced with is rated differently depending on the country. With SEPAthe possibility of a government regulation if nothing was Credit Transfer, the system will be homogenized. And this isdeveloped. At which point, as banks, we finally did it on our currently creating pressure in countries who have to changeown, implementing a SEPA scheme to be able to supplement their process and IT infrastructure to fit the system.the national payment scheme. This initiative was furtherenabled by the Payment Service Directive, which set up a So as I said, the banking landscape is going to change, withcommon legal framework, not only as regards to Payment, different processes and different earnings. Companies at thisbut also pertaining to a pan European approach to customers. point in time are defining their strategy in this matter. Do they want to to invest in the change process, outsource it toWHAT iS THE STATuS ToDAy FoR BAnkS specialized players, or in some cases, keep the infrastructureREGARDinG SEPA? in place and find partners to do the conversion to the SEPA scheme.The issue is out of our hands at this point and, at least formajor banks such as ours, we are in a waiting mode. We WHAT iS THE ouTLook FoR A BAnk SuCH AShave put in place a SEPA compliant system which is already HyPoVEREinSBAnk?processing all existing SEPA products. however we cannotswitch off the old legacy system until a European regulation, For us, as for the rest of uniCredit group banks, SEPAwhich should be published this coming September, gives an represents a range of opportunities. The big advantage of aend date to switch off all national payment systems. Targeted group like ours is that we can play on all fronts, with largedates are 2012 or 2014... infrastructures for handling big payments which are sent to main hubs, while maintaining close local ties throughAnD in THE MEAn TiME? our account managers to meet customer needs in terms of credit services, security services etc.. And we have builtAs banks, we are continuing to prepare for this date, building a completely new, streamlined system, with a whole newfunctions, products and services that will be enabled by a engine, which is ready for implementation. So it will be easypan-European system. yet at this point in time, it is a parallel for us to switch and the sooner the better. What is expensive,process, since we are still working with old schemes that is to produce with parallel systems as we are doing today.date back some 40 years! Outside of the banking system, 31
  31. 31. "thE EuropEan paymEnts arEa isan iDEa that has ComE a long wayin twEnty yEars…But has yEt toBE FinalisED."32
  32. 32. TESTiMoniALShErvE sitruk CONSuLTANTMAnSiT SASyou HAVE CLoSELy FoLLoWED WHAT WouLD BE A REASonABLE DEADLinEDEVELoPMEnTS in THE ConTExT oF A in youR oPinion?EuRoPEAn PAyMEnTS AREA SinCE THEBEGinninG oF THE 90S. THE iDEA HAS CoME Let’s take the most complex subject: cards. We are still inA LonG WAy in TWEnTy yEARS … the process of implementing technical standardisation; this will take (at least) until 2012. But to roll out this standardThe idea of a unified market goes back to the beginning on a widespread basis, by adapting systems and adaptingof the 90s. In 1994, I drafted an initial report on payment or changing all the terminals, will take eight to ten years!systems in Europe, for the Banque de France, with the help So we might have completed the process by roughly 2020.of the European Commission and other central banks. It That seems a very long time, but it’s not abnormal in thewas the first of its kind, and led to the creation of the ECB’s payments sector. It took 20 years to implement the euro.“Blue Book”. I highlighted that Europe was a patchwork of And bank cards, launched at the end of the 60s, only camepayment systems, that certain countries such as France into widespread use in Europe in the 90s, and the chip cardand germany were completely out of alignment with each then took another 20 years to spread throughout Europe –other, for both cultural and technical reasons, and that the a process which still isn’t completely finished.conversion to the euro wouldn’t change anything since it’sonly a unit of denomination. After the success of the euro, WHAT iS youR AnALySiS oF THE PoSiTionSin 2002, Brussels warned banks that they needed to start oF THE VARiouS PLAyERS?working on a European payments area. So the banks created The banks see one major advantage of SEPA, the openingthe EPC, developed new payment instruments and drew up up of a pan-European market. At the same time, they arerules… But they were to a certain extent driving blind, given anticipating the cash management needs of their majornumerous and constantly fluctuating goals: a single market clients but are seeking to protect their revenues. Largehad to be created, standards had to developed, consumer corporations do not seem to have mobilised to a greatrights had to be protected, all this in addition to running extent, with the exception of the retail sector which isthe business, increasing competition, overseeing the rise of seeking to increase its bargaining power versus the banksa European payment card player, and driving technological and interchange commissions. however, the majorityprogress, in particular in terms of the internet and mobile are little prepared for SEPA. They are waiting for all thepayments. And it’s still going on, since there is now talk of financial and technological aspects to be fixed beforee-SEPA… investing, such that there is no choice and that there is anHoW WouLD you SuMMARiSE THE CuRREnT end date. And let’s not forget another major player: theSiTuATion? public administrations. Public authorities could drive the sector forward by adopting SEPA products. however, this isEight years have passed since the launch of SEPA and the currently not sufficiently the case in Europe. Consumers arecreation of the EPC, with much work done by the EPC, not really driving SEPA forward either; even though they willmany debates, one directive and three European payment benefit from the new regulations, which are very favourableinstruments. But the project is gigantic… And there is no for them, and from reduced costs, they feel trepidationproject manager, no financing and no detailed planning, in regarding the proliferation of rules that may ensue.particular in the area of bank cards! The PSD is an essentialresponse but SEPA will not be able to truly develop as long Do you THink SEPA HAS A CHAnCE oFas the underlying business model has not been fixed. And SuCCEEDinG?the new Commissioner, Mr. Barnier, cannot fail to see that yes! A unified payments area is after all being created, withthe new SEPA payment instruments are only being used common regulations. What remains to be found is a conductorto a very limited extent. he seems to have decided to fix a to lead the orchestra, detailed and realistic planning anddeadline for making them widespread. The date 2012 has operational momentum involving the mobilisation of allbeen mentioned: this may be reasonable for payments, players, not just banks. These elements are exactly whatalthough the level of preparation among industry players, made the euro a success! Finally, a suitable financial driverincluding public administrations, is still low. however this is required for the banks. At the moment, interchangedeadline seems unrealistic as regards debits and above all commissions are financing the investments in paymentscards, given that the diversity of technical standards among infrastructure and providing the economic rationale forthe member states is so great! progress; care should be taken not to disrupt this… 33
  33. 33. "sEpa will oFFEr asaFE, stanDarDisED anDCompEtitivE EnvironmEnt."34
  34. 34. TESTiMoniALSmarC tEmmErmanExECuTIVE VICE-PRESIDENTViSA EuRoPEWHAT ARE THE CHALLEnGES AnD THE DiRECT HoW WiLL SEPA iMPACT BuSinESS AnD DoESConSEquEnCES oF PuTTinG SEPA in PLACE? THiS MEAn THE MARkET WiLL BE oPEn To nEW PLAyERS?This is a compliance exercise, which means it is obviouslycomplex to put in place. It requires doing away with rules, As I said, SEPA will definitely bring more competition sincetechnologies, processes that have been in place for years. the national walls will have been removed to make way forAnd that can be a reason for stalling for those who are a truly open European market. Already, standardisation hasreticent to change. But at the end of the day, it’s about more been finalised for credit transfers paving the way for thecompetition and increased services. Take for example, bank development of cross border competition.transfers… up till now, financial institutions had to go througha national Automated Clearing house (ACh) for their financial Does this mean more players? That is not the prime effect. Itransactions. With SEPA, a competitive environment will be would speak more in terms of opportunities, of diversificationcreated, since banks will be able to use any ACh in Europe. and growing new business… There are new opportunities also for increased service at better cost, with banks, for exampleWHAT iS THE STATuS ToDAy? who will find themselves with more choice when selecting providers throughout Europe. Large pan-European financialThere are three main workflows determined by the European institutions, which today are dealing with some 20 differentPayments Council (EPC), to establish rules for payment operators, will be able to ask for the best proposal from ainstruments regarding credit transfers, direct debits and card much wider group of providers…payments. A SEPA Credit Transfers Rules Book has beenpublished, to which all banks must comply<, Today only 5% To SuM iT uP in A nuTSHELL, WHAT iS youRof credit transfers are executed according to the SCF rules. ViSion oF SEPA ToDAy?In terms of direct debits, today, there is no direct way forexample, for a Belgium resident to pay utility bills for his house SEPA is a major work in progress and if you take thein France from his Belgian bank account. This will be made image of the glass half empty or the glass half full, I’dpossible once the SEPA Direct Debit has been implemented. definitely opt for the glass half full. Because in the longThe timeline for implementation could be dictated by Eu run, SEPA will offer a secure, standardised, competitivelegislation, possibly covering both initiatives, but there is no environment from which industry and stakeholders willdoubt, that in a number of years, national credit transfers all benefit.and direct debits systems, will have been replaced with pan And in response to those who are voicing criticism in thisEuropean SEPA payment instruments. transition period, I would refer to the deregulation of theAs for card payments, a SEPA card framework has been put telecom industry. Far from destroying it, it created a newin place that banks have to comply with in order to harmonise momentum and look at the result today! I believe SEPAprocesses. But more importantly, magnetic stripe cards are will have the same effect. If it seems slow going, you mustto be systematically replaced by chip technology only. This bear in mind the overall scope: It’s a feat in itself to havemeans that Europe would become the first region in the world over 30 countries who have agreed to undertake such in­with a fully secure card environment, taking the lead of a depth transformation of their payment processes. It’s aworldwide trend that spreads from Canada, to South America, first of its kind in the world!to Asia and Australia… with the topic increasingly discussed inthe uS.Also, a lot of work is being done to standardise morecomponents in card transactions. In the current system,a terminal vendor must get a certification from a body ineach country. Tomorrow, with a harmonised system acrossborders, the vendor will only need certification from one SEPAapproved certification body. 35
  35. 35. 36
  36. 36. TESTiMoniALSwhiChstratEgiEs willBanks DEploy?The banks have worked the hardest to pave the way for SEPA and the new European paymentinstruments. But what exactly is the position of the banks? how are they anticipating the newbusiness models that SEPA may give rise to? Seven bankers share their analysis, looking beyondSEPA to shed light on the future of the payments industry – in some cases the very near future,including the arrival of contactless payments. "Contactless payment cards or M-payments: who knows which Europeans will prefer?" WiLLy DuBoST Payments Department Manager BnP Paribas Retail Banking France "Contactless payments will "Payments are a universal undoubtedly play a major role over service." the medium term." MARC CARLoS EnRiquE BARTHE Director, Payment Systems and Services Systems Business Development and Innovation Crédit Agricole S.A. Director BBVA "opening the market to new "The crisis is affecting the whole players will amongst others of the payments sector due to a promote cost reductions." fall in household consumption." ZéLiA LiVRAMEnTo RoBERTo SAnToS Director, Payment Systems Director of Business Development and Financial Caixa Geral de Depositos (CGD) Control, Payments division Banco Santander "The majority of potential new "As far as new operators entering entrants will be interested primarily the market is concerned, the in customer management rather outcome is by no means certain." than flows." PAoLo ZAnCHi LuCA VAnini (uniCREDiT) head of e-money services, encashment and head of group Payments Development payments unicredit Banca Monte dei Paschi di Siena 37
  37. 37. "ContaCtlEss paymEntCarDs or m-paymEnts:who knows whiChEuropEans willprEFEr?"38
  38. 38. TESTiMoniALSwilly DuBostPAyMENTS DEPARTMENT MANAgERBnP PARiBAS RETAiL BAnkinG FRAnCEWHAT ARE THE MAin CHAnGES unDERWAy European harmonisation, which we’re working on within THE WoRLD oF PAyMEnT SySTEMS? AEPM, should contribute to the expansion of this market. English banks are leading the way in this area in the uK,Since the invention of the chip card forty years ago, we as is Visa (which already has 6 million contactless cardshave seen numerous technological developments, each in the field), which should make the Olympics in Londonbringing increased security. Today we’re witnessing in 2012 an enormous showcase for this new offering.genuine revolutions. The first is technological, with newforms of contactless payment and NFC (Near Field WHAT’S MiSSinG ToDAy THAT iS nEEDEDCommunication) technology: uSB keys, contactless To MAkE THiS oFFERinG A REALiTycards, mobile payments by telephone… Soon this will THRouGHouT EuRoPE?in turn trigger a revolution in user behaviour: think ofP-to-P (person to person), which will allow you for Several matters remain to be addressed. Firstly, thereexample to pay your plumber as soon as he finishes the was the challenge of regulation at European level.job. Add to this a marketing revolution characterised by This took time, but was essential to guarantee optimalresolutely one-to-one marketing and new services built security. Other countries (such as japan, India andaround payments – loyalty or coupon programmes, for certain African nations) have definitely made more rapidinstance. progress, but their systems will not be able to meet European requirements.WHiCH RoLE iS BnP PARiBAS PLAyinG inTHESE VARiouS REVoLuTionS? Secondly, we still need to finalise certain contractual aspects with operators regarding the allocation ofBNP Paribas was the driving force behind the creation responsibility and financial flows. In this context thereof AEPM (Association Européenne Payez Mobile), which are some very operational questions for customers: ifbrings together banks and telephony operators to I want a telephone with an NFC chip, where can I buydefine the mobile payment architecture of tomorrow. In one? From my operator or from my bank? And if I losethis context, we have actively participated in two pilot my telephone, how can I be sure that the chip will beprojects running since the end of 2007 in Caen and disabled for both communication and for payment?Strasbourg – and we will of course be part of the project These are the types of issues the upcoming pilot projectsstarting soon in Nice. will enable us to resolve.A word of caution nonetheless: we’re not just testing WHiCH ConCLuSionS HAVE you DRAWnnew technologies for the fun of it; we’re acting first and FRoM THE MoBiLE PAyMEnT PiLoTforemost in our role as bankers! Our mission is above PRoJECTS in CAEn AnD STRASBouRG?all to respond to the needs of our clients in a securepayments environment. We definitely consider Caen and Strasbourg to be very successful. We equipped 1,000 test customers withiS THERE REAL DEMAnD FoR ConTACTLESS NFC telephones and 200 businesses with dedicatedPAyMEnT ToDAy? terminals. Customers have become very attached to their telephones despite their lesser ergonomics (theIn certain customer segments, the demand is undeniable. telephones provided were prototypes). The businessesAccustomed to mobile telephony and contactless cards were also satisfied with the benefits of the pilot projects,for public transport, younger consumers are attracted in particular in terms of payment of small amounts –to these technologies to accelerate transactions. This is benefits which contactless payment should continue toparticularly true for small amounts (less than EuR 20­ increase. We still have work to do in this area. Very soon25) for which the customer doesn’t have to input a PIN we will move into an expansion phase with large scalecode - in the systems that we have implemented. testing in the city of Nice. 39
  39. 39. "who will BE WHAT’S GoinG To HAPPEn in niCE? thE winnEr? thE On May 21st the operation “Nice, NFC City” will start. 3,000 telephones will be put into circulation and will Company aBlE function in the city’s stores but also on public transport and in museums. Contactless cards will also be offered to proposE an to the inhabitants of Nice and contactless terminals will be deployed within numerous local businesses. All appropriatE the banks will take part in the project, with different offerings in terms of products, services and prices. As sErviCE oFFEring, for us, we’ll be testing two offerings: one with a mobile phone (highly ergonomic), the other with a contactless at an aCCEptaBlE payment card. priCE, without The Nice pilot programme will allow us to test our customers’ appetite for various offerings and to observe making thE CliEnt new behaviours – of customers, but also of businesses and operators. It’s extremely exciting! ExpEriEnCE morE WiTH THE nEW EuRoPEAn REGuLATionS, Do you ExPECT nEW PLAyERS To ARRiVE CompliCatED on THE PAyMEnTS MARkET? than it is toDay." It’s already happening! It’s being led by the large retail banks which have already launched their contactless offerings – which is entirely normal, given that this is a universal interbank technology. WHo WiLL Win THE uPCoMinG BATTLE FoR THE ConTACTLESS SPACE? The company that will be able to offer its customers (both people and businesses) a suitable service at an acceptable price – and that will ensure the customer’s life is not more complex than it is today. The security of the system on the one hand, and the customer experience on the other: those are the fundamentals of the business. It’s also worth noting that even though Europe has harmonised its legislation, the same will probably not hold true for usage habits. The Nordic countries have been accustomed to mobile telephones for a long time already and will doubtless prefer mobile payments; other countries will probably have a predilection for payment cards. It’s difficult to predict what customers will prefer – but we’ll find out soon enough!40
  40. 40. 41
  41. 41. "ContaCtlEss paymEnts, anDmorE spECiFiCally thosEmaDE By moBilE phonE, willunDouBtEDly play a majorrolE ovEr thE mEDium tErm."42
  42. 42. TESTiMoniALSEnriquE BarthESySTEMS BuSINESS DEVELOPMENT AND INNOVATIONDIRECTORBBVAWHAT ARE THE MAin CHALLEnGES To BE these new players will focus on remote (internet) payments,FACED in RELATion To THE iMPLEMEnTATion others will utilise new technologies and formats closelyoF THE PAyMEnT SERViCES DiRECTiVE (PSD) linked to mobile telephony, and others will draw on theirAnD SEPA? current client base or current commercial offering, as may be the case with telecommunications companies. It is quiteFirst of all, the modifications to the systems, processes possible that alliances will form between traditional financialand customer management practices are being made intermediaries and these newcomers, who will combineby financial institutions during a time of great economic their technological and business capabilities to better serveuncertainty. Secondly, and of equal importance, the need the customers who use these methods of payment.to ensure that consumers fully understand the changes tocommonly used payment instruments and how to use the WHAT WiLL THE iMPACT oF SEPA BE oninstruments themselves. BuSinESS MoDELS?HoW WiLL THESE MoDiFiED MEAnS oF I’m going to respond to this question with regard to cards,PAyMEnT AFFECT THE MARkET, BoTH rather than in terms of bank transfers sent or received. TheDiRECTLy AnD inDiRECTLy? drop in interchange rates is already a given, the migration to EMV chip cards has already begun, and the differentiationThat will to a large extent depend on the practical application of discount rates, within a business, according to transactionof the law. In theory, a single payment area should promote type has already been approved. This will result in lessgreater competition and should thus broaden the use of income for banks, greater competition in merchant accountthese means of payment while decreasing the use of cash. fees and, above all, require a huge investment in order toThis would be very beneficial in terms of administrative adapt technology (cards and merchant networks) to thecosts and also in terms of the reduction of under-the-table established EMV standard. This model poses a risk to certaintransactions in certain geographic areas. business models such as "monoliners," institutions that focus mainly on the issuing of cards with little infrastructureThe indirect impact of the law may, however, be just the to support innovation and a weak physical businessopposite: by differentiating discount rates and enabling network. Other multi-product institutions that are equippedbusinesses to transfer the cost of payments made with a with business networks will also see a decrease in income,bank card to the end customer, this could, paradoxically, but they can take advantage of the technological evolutionresult in a situation where consumers choose to use cash to invest in innovation and new value-added services thatin order to pay a lesser amount for the same product. The could balance out the fall in earnings over the medium term.law would then be promoting the use of cash (along withthe administrative costs that cash entails) over the use of WHAT oTHER CHAnGES Do you SEE in THEbank cards. This will be examined in greater detail when we nEAR FuTuRE? (in TERMS oF TECHnoLoGy,discuss how the law will be applied to business transactions. CAPABiLiTiES, ETC.)HoW Do you BELiEVE THAT THiS WiLL Aside from the investments required of the financialEFFECT CoMPETiTion? institutions, as already pointed out, I believe that there will major opportunities for innovation. Contactless paymentsThere will definitely be consolidation of players and possibly and payments via mobile phone in particular will definitelythe creation of new European payment systems. This will serve as a common means of payment in the not-too­stimulate greater competition, greater innovation, and new distant future. Integrating a bank card into a mobile phonevalue-added services for customers who use these means of would open up endless possibilities for customers: theypayment: in short, greater competitiveness at a European level. could view their balance or transactions, request financing for a purchase in real time, earn loyalty programme rewardsin youR oPinion, WHAT WiLL BE THE that are redeemable directly through their mobile phoneConSEquEnCES oF oPEninG uP THE MARkET and much more. We will see a major revolution in paymentTo nEW PLAyERS? methods and behaviours over the next few years. At firstIt is very likely that newcomers to the payment service these will not be large-scale changes, but they will be feltindustry will arrive on the scene, this being one of the strongly in certain market segments.objectives of implementing SEPA and the PSD. Some of 43
  43. 43. "paymEnts arE aunivErsal sErviCE. "44
  44. 44. TESTiMoniALSmarC CarlosDIRECTOR, PAyMENT SySTEMS AND SERVICESCRéDiT AGRiCoLE S.A.WHAT iS youR CuRREnT AnALySiS oF THE WHAT oTHER DEVELoPMEnTS AREiMPLEMEnTATion oF SEPA AnD THE PSD? CHARACTERiSinG THE PAyMEnTS SECToR?Banks have committed themselves to considerable The potential of both remote banking and electronicinvestments to integrate new SEPA compliant means of business is still enormous. Recall that technology availablepayment into their information systems. As the PSD has today makes it possible to imagine means of paymentcreated further obligations, for both national and SEPA that are independent of the channel used – be it internet,compliant payment systems, the banks have tried to telephone or card. A sort of universal payment instrument,convince their clients to migrate quickly – but have met with as it were! It’s also worth noting what is happening onresistance from national markets, and the important thing certain internet sites: using virtual currency (such as thenow is that the deadline for completion of the migration “Q-Coin” in China), two people can trade physical goods.be set! Only then will all the players involved be able to We haven’t yet assessed all the consequences of theseorganise themselves appropriately. phenomena. What are the business models that underpin these transactions? how can the risk of fraud be monitored?ARE PAyMEnTS inSTiTuTionS A THREAT FoR What will happen if one of these sites, having “captured”BAnkS? millions of users, suddenly decides to increase the payment commissions it charges?The intent behind the PSD is without doubt to stimulatecompetition, but the activities it foresees for payments until now, Europe has focused its attention on traditionalinstitutions are still limited. In France, if I’m not mistaken, means of payment. A lot of work will need to be done ononly two licenses have been granted under specific these new means of payment, both to make them secureconditions. That said, upon closer examination it becomes and to drive forward business models that will have becomeapparent that competition already exists: Carrefour is now inevitable.issuing a card that is compliant with only the Mastercardrules, whereas it makes use of the Carte Bancaire (national WHAT ARE THE MAJoR CHALLEnGES FoR THEbank card association) infrastructure. MonTHS AHEAD?WiLL WE SEE THE APPEARAnCE oF nEW Europe has formed a SEPA committee to manage the entireBuSinESS MoDELS? project. It’s an important initiative: there is indeed a lack of real governance, which is needed to decide which aspectsIt’s one of the challenges at this time – with in the background will be regulated and which left to competition betweenthe question of interchange commissions. When you make players, and to put pressure on the latter to make progress.a payment, you are implicitly giving a double mandate – to The first priority is for this committee to be put in place andyour bank, and to that of the seller. This operation has a cost to get to work quickly.(which includes fraud detection) that has to be covered.It remains to be determined what a fair division of valueconsists of. Will this be decided by the market, or fixed bya regulator? The second solution seems more equitable inmy opinion. Because payments are a universal service, thereis no reason for a small bank to pay more than a large one. 45
  45. 45. "opEning thE markEt to nEwplayErs will amongst othErspromotE Cost rEDuCtions."46

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