SEPA has fallen short when it comes to digital payments that are even more central to our daily lives: there is no SEPA at the point of interaction, namely for in-store, mobile or e-commerce payments.
The Single Euro Payments Area (SEPA) was launched in 2002, aiming to address the fragmentation in non-cash payments that prevailed at the time. Payments between euro area countries were slower, more cumbersome and more expensive than domestic payments. And yet, many market participants questioned the merits of the project: will SEPA make payment services more efficient? Will it make the economy more competitive? And will it deliver real benefits to customers?
Fast-forward to today and it is clear that the initial scepticism was unfounded. We no longer differentiate between national and cross-border payments in euro for credit transfers and direct debits. And people really appreciate the benefits of these two payment services for seamless money transfers across Europe.
However, SEPA has fallen short when it comes to digital payments that are even more central to our daily lives: there is no SEPA at the point of interaction, namely for in-store, mobile or e-commerce payments. Person-to-person (P2P) solutions also remain fragmented.
Most European retail payment solutions are focused on national markets, covering only some use cases and lacking pan-European reach. Because of this fragmentation, cross-border transactions within the euro area have become dependent on a very small number of non-European market players. This hampers competition, innovation and resilience. Moreover, the digitalisation of payments is undermining the crucial role cash plays in financial inclusion. After all, it is the only means of payment that has legal tender status and can be used by anyone, anywhere in the euro area, free of charge.
As a result, we are once again at a crossroads. And just like in the past, the added value of taking SEPA to the next level is now being questioned: do we really need a Single Euro Payments Area at the point of interaction? Do we really need a digital euro?
The answer, much like two decades ago, is an unequivocal yes. We cannot afford to settle for the status quo. And we should ask ourselves some hard questions: why aren’t European retail payment solutions and platforms able to compete at the global level? Today, the market capitalisation of the largest European bank is several times lower than that of the dominant international card schemes. European payment solutions struggle to compete with these non-European payment providers even within Europe, while in the United States new retail payments companies succeed in scaling up rapidly.
In my remarks today, I will argue that this has to do with the difficulty European payment service providers (PSPs) have in reaching pan-European scale. And I will advocate a comprehensive vision encompassing both public and private retail payments. Our goal is clear: to further integrate European payments with a view to supporting competition and innovation, while reducing excessive dependencies. Payments offer significant scope to deepen the Single Market in the interest of users and to enhance the competitiveness of European financial services.
To emulate the success we had with the launch of the SEPA project, we need to resist the temptation to preserve the status quo. Instead, we must act, relying on the combined knowledge, expertise and efforts of both public authorities and private intermediaries to achieve a single area for retail payments in euro. The benefits in the medium and long run will be much greater than the initial investment costs.
The ECB is today calling on the payments industry to redouble its efforts.
Retail payments remain fragmented and dominated by a few non-European players..
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