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17 April 2019

ECB: Card payments in Europe

The Eurosystem reviewed the progress towards SEPA for cards and identified barriers hampering its establishment by market players. On this basis, it re-evaluated its policies and objectives to facilitate the activities of market players and help promote the development of SEPA for cards.

Payment cards are perceived as an efficient and convenient way of making retail payments. Therefore, it comes as no surprise that they are the most widely used and the fastest-growing electronic payment instrument in Europe. However, the differences between cards usage in the various European countries is strikingly high and the percentage of cross-border card payment transactions is still relatively low in volume terms. This observation indicates that there is still vast potential for cards usage growth, both within many individual countries and across European borders. The cross-border acceptance of cards issued under national card payment schemes could contribute to achieving the SEPA for cards “any card at any terminal” objective, and foster a further take-off of card payments in Europe. So far, despite significant efforts by the industry in recent years, this aim has not been achieved and cross-border acceptance relies on co-badging with international card payment schemes.

Technological innovations, combined with new legislation that spurs competition among stakeholders, have influenced and will continue to influence the landscape of card payments in Europe. These developments have large-scale effects in the fields of:

  • security, with the appearance of not yet mature solutions on the market that may impose a security risk for users;
  • sovereignty, with the increasing adoption of payment solutions from non-European market players; and
  • market integration, with the risk of fragmentation of the European market due to the emergence of proprietary local solutions that do not allow pan-European reach.

European innovations improve the efficiency of the market and lead to new, more versatile and secure services for users. Therefore, the use of European SCT Inst infrastructure for the clearing and settlement of card payments could be, amongst other possibilities, a solution to ensure the pan-European reach of national schemes at a potentially low cost and to increase efficiency in the European cards market. At the very least, using interoperable or common clearing and settlement SCT Inst infrastructure for card payments and interlinking national card schemes and processing entities has the potential to increase efficiency and competition.

New entrants and new payment services may considerably affect the traditional card payments business model. In particular, new payment services and instant payment solutions, combined with innovative channels such as mobile phones and wearables, might diminish cards’ share of the payments market. In this increasingly competitive market, only payment solutions providing efficient services at competitive prices for customers and merchants will manage to attract new users.

Therefore, cooperation between incumbents and new market entrants is key to developing the missing elements of a SEPA for cards and for preventing fragmentation of the European single market. Innovative and standardised industry-driven solutions based on open standards could enable pan-European reach of (card) payment products and services and ensure European technological independence.

Over recent years, the Eurosystem has monitored developments in different areas of the cards market and facilitated the activities of relevant stakeholders, while promoting and extending cooperation where possible. In order to address the issues identified and help the market to achieve a harmonised, competitive and innovative European card payments area, as envisaged in a SEPA for cards, the Eurosystem will continue to pursue its activities to facilitate dialogue among market players and will continue to provide support for their activities in line with the aforementioned objectives. Nonetheless, SEPA for cards is market-driven, so only the ambition and determination of relevant market players will bring about a harmonised, competitive and innovative European cards market in which they will be able to maintain their strategic influence

Working paper

© ECB - European Central Bank

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