Friday, January 13, 2012

Towards an integrated European market for card, internet and mobile payments: online consultation

Brussels, 11.1.2012.COM(2011). The European Commission is looking at ways to spur competition and spark innovation. As a first step, the EU is seeking the public’s views on achieving these goals. A discussion paper  outlines some of the issues, and possible ways of addressing them: competition – improving market access for existing payment providers and making it easier for new companies to enter the market security and data protection – encouraging people to use alternatives to cash by making them more secure clear information on charges – protecting consumers from hidden charges and keeping prices down by helping them compare like with like systems that work throughout Europe – introducing common technical standards for greater compatibility. Currently national differences mean that bank cards often can't be used outside the country of issue, for example. 

Our online consultation is open until 11 April 2012. The comments we receive will inform decisions on the next steps to be taken, expected to be announced before July. 

Any proposals arising out of the consultation would complement common pan-European standards already developed for credit and direct debit transfers. 

Encouraging e-commerce

They would also support EU measures to boost online trade (e commerce), such as the 16 recent proposals  to encourage e commerce. 

Protecting consumers online 

Enforcing EU rules for online trading is essential to protect shoppers and build consumer trust. The EU has been conducting regular investigations into websites offering consumers products or services. The latest is a sweep of about 500 consumer credit websites. Of these, 70% were found to breach EU consumer protection rules. The companies behind them will be asked to correct their websites – and could face legal action if they do not comply.

Towards an integrated European market for card, internet and mobile payments

Secure, efficient, competitive and innovative electronic payments are crucial if consumers, retailers and companies are to enjoy the full benefits of the Single Market, and increasingly so as the world moves beyond bricks-and-mortar trade towards e-commerce. The way goods and services are purchased in Europe is fundamentally changing. As EU citizens and businesses become increasingly active outside their country of origin, electronic payments that work smoothly across borders significantly facilitate their daily lives. Building on achievements in the field of retail payments, Europe has an opportunity to be at the cutting edge of what ‘making a payment’ could mean in the future, be it with a payment card, on the internet or by using a mobile phone.

A first important milestone on this journey is the Single Euro Payments Area (SEPA), which is based on the premise that there should be no distinction between cross-border and domestic electronic retail payments1 in euro across the EU. The SEPA project covers the key retail payment instruments: credit transfers, direct debits and payment cards. From this basis, SEPA should be a springboard to creating a competitive and innovative European payments market in two ways. The first concerns the ever-growing proportion of on-line or internet payments (e-payments) and mobile payments (m-payments). Above all, the mass take-up of smart phones is changing the payments landscape and is leading to new payment applications, for example electronic purses, replacing wallets and physical cards, or virtual public transport tickets stored in a mobile phone. Here, the pan-European SEPA payment instruments can provide the basis for more integrated and secure payment innovations. Secondly, the existing standards and rules developed under SEPA could be re-applied to payment instruments in non-euro currencies, thereby taking the boundaries of a Single Market for payments beyond euro-denominated transactions.

The benefits of more market integration would mainly stem from four drivers:

1) More competition — in a network industry, such as payments, market access for new entrants or competitors from other Member States is facilitated through integration. Based on common open standards, service providers could offer their existing payment solutions in more than one country. This would expand their business base and hence create an additional incentive for innovation. As a result, the costs and prices of providing payments would converge downwards. Moreover, more competition could mitigate the current domination of the payment cards market by the two existing international card schemes.

2) More choice and transparency for consumers — with a broader range of competitive services, payment users could choose the payment instruments and providers that best serve their needs. Today, the cost implications of the choice they make are often not visible to consumers2. Due to hidden costs, often the most expensive payment method is used and costs are indirectly passed to all consumers through increased prices. By contrast, an integrated and transparent market would steer consumers towards the most efficient payment instruments.

3) More innovation — an integrated market increases scale effects. This means that existing players would have more opportunities to save costs or increase revenue. Furthermore, the incentives for innovation by new market entrants would be higher and the geographical scope of innovation would increase.

4) More payment security and customer trust — in line with the progress achieved in safe and secure payments at the point-of-sale, an integrated market would increase the security of, and consumer’s trust in, remote payments, such as e-payments and m-payments.

An integrated EU market for payment services could also produce, as a by-product, administrative data that could be used for the production of harmonised statistics. This would increase the quality and scope of EU statistics, with no additional costs for companies and limited investment for the statistical community.

This Green Paper assesses the current landscape of card, internet and mobile payments in Europe, identifies the gaps between the current situation and the vision of a fully integrated payments market and the barriers which have created these gaps. The objective of the Green Paper is to launch a broad-scale consultation process with stakeholders to validate or contribute to the Commission’s analysis and to help identify the right way to improve market integration.


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