With over 800 delegates (a record), the European conference dedicated to Payments, EBAday, took place in Amsterdam 12th and 13th May 2015.
After allowing a few days to reflect, it is time to share some key insights from the vibrant event.
Firstly: SEPA was not a central topic (a relief for most delegates), although there are still some small pending issues (e.g. migration waivers, non-Euro countries, governance). Now the payments industry is focusing on driving the revolutionary change that will happen in the next few years, with the advent of what we call “Everyday Payments”.
Relevant industry topics were discussed: customer needs and expectations, user experience, financial crime combat, e-identity and cybersecurity, regulation, banking and infrastructures system modernization, liquidity management, digital growth and revolution, innovation and alternative payments, new entrants, Fintech’s, new and crypto- technologies, investment strategies, competition, collaboration and more.
From our view, the two topics that stood out and received key focus were instant payments and PSD2.
1. Instant payments
Fostered by ERPB’s vision of “cashless cash”, real-time retail payments are seen as the next step forward in Payments towards innovation. With a clear demand in the market and a threat from non-bank PSPs (e.g. the GAFA’s), European banks and infrastructures are working on defining how to deliver instant payment solutions.
In their discussions, they face challenges such as the customer proposition and use cases (e.g. customer-to-customer, customer-to-retail), business and scheme models, card cannibalization, on-line processing (including KYC/AML/sanctions), value added services, secure settlement, messaging standards and integration, access to the infrastructure, interoperability, real-time technology investments / business case and regulatory compliance.
In our opinion, banks should re-use SEPA instruments as a base for instant payments (but substantial work is still required to create a fully functioning message set, including support for synchronous processing); and banks should develop local solutions initially (aligned with ERPB’s guiding principles) as quickly as possible to ride the wave of digital revolution and recover the centricity in their relationship with customers (see Instant Payments in the Eurozone video and read Immediate payments: Seizing the Customer Opportunity).
In parallel, they should keep working on ensuring efficient interoperability at an international level or developing alternative regional propositions, which typically are a much smaller segment of the market than local payments and take more time to deliver.
The digital customer demand for user experience, convenience and reach (where they are not interested in technicalities – e.g. card, wallet or account) opens the door for new entrants in the digital payments domain.
Thus, the combined impact of the revised Payments Services Directive (expected to come into force by 2017 and which will introduce regulation of TPP’s and third party access to bank accounts – “XS2A”) and APIs as a technology enabler will be profound and pervasive for the industry.
At the EBAday event, we heard some concerns from banks around security, standards in the channel space, KYC/AML controls, liability for failed or fraudulent payments, etc.; but also some interesting approaches and ideas such as banks becoming TPPs of other banks, or developing standard APIs not only for XS2A but also for strong authentication, or monetizing the associated information as value added services, or embracing collaboration with Fintechs. What was clear to all is that PSD2 opens a huge range of opportunities and that if banks don’t take advantage, others will do. A recurrent comment was “Are you here to stay? Then you have to invest”.
We believe that banks need to answer many questions around their digital payments strategies and the transformation journey needed to turn those strategies into reality. They must also examine the potential for value-added services in both the retail and corporate markets, and assess their security settings to ensure they are not compromised when providing TPPs with access into their systems. In our view, banks should not treat PSD2 as a compliance exercise, but recognize these changes as a catalyst for their own digital payment programmes. (For more information, read “Welcoming a new phase of Everyday Payments in Europe”
We have seen banks discussing what to do and how to do it and showing renewed and energetic interest to take Payments to the next scale. Quoting EPC’s Chair Mr. Javier Santamaría at the final remarks of the conference, “we are living exciting times in the payments industry where, as it happens with a fractal pattern, you find complexity across all scales, which, at the end, is what makes it beautiful”.