We live in a fast-paced society which comes with its share of opportunities and challenges.
We have had the privilege to interview Emőke Péter, representative of the European Digital Payment Industry Alliance in the Payment Systems Market Expert Group (PSMEG) and dep. Head of Global Public and Regulatory Affairs at Worldline.
What is the PSMEG?
The Commission’s expert group, created in 2009, mainly assists the European Commission in the preparation of legislative acts and policies relative to payments. With an outstanding track record of leadership in the non-profit sector and many years of policy-making at the European Parliament and the European Commission, Emőke aids the PSMEG in the best interests of European non-bank Payment Service Providers (PSPs) such as HiPay. She promotes dialogue and cooperation between the industry and stakeholders.
“Any time there is a new legislative initiative in preparation, the Commission is consulting, meaning reaching out to experts, such as the experts of the PSMEG, to sit together, and with their input, support the legislative process […]. Based on the needs, Commission expert groups meet 3–4 times a year, depending on the legislative schedule.”
Since regulations impact our everyday life, the European Commission has the duty of regularly seeking the opinion of citizens and stakeholders as part of its Better Regulation Agenda. The Commission is committed to listening more closely to citizens and stakeholders by opening up policy-making and inviting stakeholders to express their views. Expert groups like ours ensure that whenever new legislation is in preparation, we look at all possible outcomes to avoid negative impacts and ensure it serves the best interest of all. This is behind closed doors and it is fairly technical. “Yet, the fascinating thing with EU decision-making is that, while in a different way, any EU citizen has the possibility to be involved in the same process” Emőke adds.
The Role of European PSPs and Instant Payments
The main subject of debate currently is instant payments, on which the Commission has put forward a legislative proposal on the 26th of October of last year. This would allow anyone to transfer money in a matter of seconds, even during weekends and public holidays, and at a lower cost than today. Based on the proposal, there are four requirements to be met:
- Availability: PSPs that provide credit transfers must provide an instant version.
- Affordability: the cost of instant payments should not exceed the cost of traditional credit transfers.
- Anti-fraud measures: PSPs need to check whether the payment information provided has discrepancies or not (i.e., to check the match between the name of the beneficiary and the IBAN) to make payers aware of potential mistakes or avoid fraud.
- Frictionless payments: Service providers should compare their customers with an EU sanction list daily, instead of screening every transaction one by one.
“The proposal aims generally to support innovation and competition and to contribute to a wider European objective of digitalization and open strategic autonomy.”
The proposal shows a lot of promises for innovation, however, in its current version, might fail at addressing one significant issue. The proposal exempts E-Money Institutions (EMIs) and Payment Institutions (PIs) from the requirement to offer instant payments due to the existing legal barriers that prevent them from directly accessing payment systems. This legal barrier is called the Settlement Finality Directive (SFD), effective since 1998, which excludes PIs and EMIs as direct participants of the designated payment systems. This means they are excluded from the scope to offer instant payments.
Because every relevant player in the market needs to be on board to reach the objective set by the legislation, amending the SFD has become crucial. As the political mandate is coming to an end, this is time-critical.
“The industry firmly believes that providing non-banks with the option to directly access the fundamental clearing and settlement infrastructure for payments is vital. […] In an open letter to the European Commission, eight industry associations urge European policymakers to address this matter in a timely fashion by amending the Settlement Finality Directive before the implementation phase of the instant payments regulation.”
Payment service providers are confident a political consensus will be reached with the right choice of opting for an open, inclusive, competitive instant payment ecosystem which serves the interest of both citizens and businesses.
The payment industry is used to facing new challenges daily, and with ambitious goals, such as the digital euro, instant credit transfers or open finance, new trends arise – trends that will shape our common future.
What does the future look like?
“Both with regard to policy priorities and the developments in the private sector, there is a trend, the trend of moving toward a greener, more sustainable and digitally more interconnected society.”
These developments bring us closer to a cashless society, where electronic wallets, cashless transactions, and even cardless, instant payments, are the norm. The payment industry will go through a series of transformations in the years to come, which will bring more choices, better, faster, and stronger services for citizens. As such, we expect new payment methods to accelerate this transition, such as the European Central Bank’s digital euro getting ready to enter the market, among other factors. At the same time, with increased digitalization and the development of platform and data economy, the transition from open banking to open finance looks also promising.
Europe is, as always, in the driving seat of this transformation at the regulatory level, being one of the most innovative and collaborative continents. When it comes to digital payments, Europe already plays a central role in their democratization, with the simple aim of making the life of its citizens easier. Emőke Péter, as a member of the PSMEG, contributes to many regulatory processes that mold tomorrow.
“We are at the crossroad between finance and technology, between commerce and banking, between global trends and local realities. […] Indirectly, we can say, we shape the future of money and payments.”
Few things have evolved as quickly as our habits during the pandemic, which was a catalyst for change. Consumers have learned to adapt and to accept innovation faster than ever before, guided by companies operating in digital payments which contribute to the digitalization of society, and public affairs experts like Emőke Péter who contribute to the future of payment legislation.
“We can see that there is a general trend, and this trend is moving towards a greener, sustainable, and digitally more interconnected society: a transformation, from a cash into a multidimensional, multifunctional digital payment ecosystem.”
As companies designing and operating digital payment and transactional solutions, we not only enable sustainable economic growth and reinforce trust in our services, but directly contribute to the successful digital transformation of our European economies, and the digitization of the society in general. At the same time, as public affairs experts, while supporting legislative processes and feeding them with factual information, we directly contribute to the creation of the future of payments legislation. Being part of it is very exciting, but it also implies, for us all, a strong sense of responsibility toward our ecosystem and the society at large.
And working in Europe for Europe is a significant plus. Europe is certainly one of the most innovative continents for digital payments.
To Emőke and her peers in EDPIA, collaboration is the key to unlocking new doors and achieving the greatest goals, such as sustainability. The history of the European Union proves that there is power in a group of people working together towards one common objective. Today, the European payment sector has a busy policy agenda that needs to be carried out in a way that serves European citizens and is respectful to the planet. “This should encourage the whole industry to collectively contribute to this transition in a sustainable and green way.” This new, complex environment is a big opportunity for teamwork between public-private players. As Henry Ford once said, and as Emőke reminded us: “If everyone is moving forward together, then success takes care of itself.”
“Now, we have ambitious, new European goals, such as the digital euro, instant payments, open finance and only by working together, can we achieve more. […] We want to contribute to this transformation, co-creating the new reality, working together as a team and creating solutions, European solutions.”
At HiPay, we are proud to be members of the European Digital Payments Industry Alliance and to be represented by Emőke before the PSMEG. As always, we strive for a future where enhanced, affordable, accessible, and instant payments are the norm, and we are excited to keep on going.
We would like to thank Emőke for her insight and for speaking with us. You can learn more about her on her LinkedIn page, where she posted about the importance of amending the Settlement Finality Directive.