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The European Payments Initiative (EPI) aims to create a pan-European solution

With the aim of creating a payment system and continental exchange network that would compete with MasterCard and Visa, the European Central Bank promoted two years ago the European Payments Initiative (EPI).

In July 2020, a group of 16 large European banks from five countries (Germany, Belgium, SpainFrance, and the Netherlands) paved the way for the future launch of the European Payments Initiative, by announcing the creation of a transit company in Brussels, responsible for initiating the implementation of the joint payments initiative.

EPI’s ambition is to create a pan-european payment solution unified and innovative system that takes advantage of instant payments (“SEPA Instant Credit Transfer, SCT Inst”) and offers a card for consumers and merchants throughout Europe, an electronic wallet and payment functions between individuals (“P2P”). The solution aims to become a new standard in payments for European consumers and merchants in all types of transactions, including those carried out in person or online, such as cash withdrawals and electronic payments between individuals, such as alternative to existing international payment solutions and schemes, according to CaixaBank.

Companies such as Worldline and Nets have become shareholders of the company, becoming the first non-bank acquirers to join the initiative. The participation of these types of agents will greatly contribute to the expansion of EPI’s acceptance network at merchants in Europe and will allow EPI to build its own payment ecosystem on the continent. Conversations with other entities to join the project are also evolving favorably.

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common structure

The aim of this project is to replace national “schemes” in the long term, relying on existing agents. The core of the new system is the European instant payment system TIPS (Target Instant Payment Settlement). Banks, the European Commission, central banks and public authorities come together to promote European payment sovereignty against the technology giants of the United States and China.

technological challenge

The European Payments Initiative must fully integrate the new payment habits of European consumers. Therefore, it consists of three components: the transaction by card or bank transfer in instant payment mode, the payment request service that allows the recipient to send a request for payment to the debtor and finally the electronic wallet that combines both the card and the payment request service in a mobile phone, as Retail Actual assures. The business model is based on interchange fees received from the European Commission. Thus, all national and cross-border payment flows would be covered by the new system.

Advantages for the Spanish and European market

A common payment solution developed in Europe would reduce the risks and vulnerabilities of retail payment systems and it would help maintain control over sensitive payment data, thereby better protecting citizens. The foreign players in the spotlight are, in particular, the US Visa and Mastercard, which have taken a leading role in European payments for the last 20 years.

But with the massive digitization of the sector, the threat of other actors with an eye on payments is also growing: the technological giants such as Apple, Google, Amazon or PayPal, which have enormous financial resources. In addition, the success of the EPI would bring the rules of that new system more in line with EU legislation on payment services and electronic money issuance, compared to the rules of the main international card schemes, which are based on American normative concepts.

Consequences for consumers

Banks and non-bank PSPs must ensure that PPE does not interrupt or confuse the payment experience for customers when banking online or shopping. However, this new competition is expected to translate into faster payments and greater interoperability between payment service providers in the EU, thanks to a new pan-European card system. Payments will be made throughout Europe thanks to this native solution integrated into digital phones and wallets.

However, big tech companies are calling for consumers to be given freedom of choice. That is to say, that they open their operating systems and tools to third-party applications, in particular through NFC technology, whether from banks or payment specialists, under decently remunerated conditions.

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