Why is the Eurosystem interested in retail payment innovations?
Payment innovations can be either drivers of or barriers to the process of establishing a single and efficient market for payment services. On the one hand, they can speed up the integration process, whereby payment service providers move from offering solutions for a purely national market towards more integrated Europe-wide solutions.
On the other hand, they can slow down integration if, for instance, they act as a barrier to entry or contribute to the fragmentation of payment services offered in Europe. Some innovations and developments may potentially threaten the security and integrity of payment systems, while others may offer better protection against existing or new security threats.
Types of innovation
Below is a short description of the most relevant types of retail payment innovation. A more detailed description of these innovations can be found in the 7th SEPA Progress Report. ( download ).
In addition to paper-based mandates, the SEPA direct debit enables the issuing of mandates that have been created through electronic channels, which are known as e-mandates. The e-mandate process allows debtors and creditors to agree on mandates in a fully electronic way. The e-mandate solution is based on online banking services, whereby the debtor can use his/her online banking credentials. The European Payments Council has provided rules for implementing the e-mandate service as an optional feature within the SEPA Direct Debit Scheme Rulebooks.
Online e-payments (internet payments) are payments for which the payment data and the payment instruction are transmitted and confirmed via the internet between the customer and his/her payment service provider in the course of an online purchase of goods or services from a web merchant.
This definition excludes payments that are initiated via an online banking application, but which are not integrated in the process of online shopping. No differentiation is made between the device (computer, mobile phone) and/or the service technology used to access the internet as long as the payment data is transmitted and confirmed via the internet.
Mobile payments (m-payments) are payments for which the payment data and the payment instruction are transmitted and/or confirmed via mobile communication and data transmission technology through a mobile device. Mobile payments can be classified as proximity payments (contactless payments using, for example, near field communication technology) and as remote payments.
Electronic invoicing (also known as electronic bill presentment and payment – EBPP) can be defined as the sending or making available of invoices and their subsequent processing and storage, wholly by electronic means.
Electronic invoicing offers substantial benefits over paper invoicing, such as faster payments, fewer errors, reduced printing and postage costs and, most importantly, full process automation and integration from order to payment between trading parties. It is estimated that businesses in SEPA can save up to €65 billion per year when using e-invoicing. For further information on e-invoicing and the role of the European Commission therein, see the European Commission’s website.
From time to time the ECB looks into specific developments in retail payments to assess if they affect the tasks of the Eurosystem. Some of the results were published in special reports and discussed at special conferences.
- Sibos leaflet 2013, September 2013 – including "Payment innovation trends: two examples"
- Virtual currency schemes, ECB report, October 2012
- Towards an integrated European card payments market, ECB Monthly Bulletin article, January 2012
- The future of retail payments: opportunities and challenges, summary of a joint conference by the ECB and the Oesterreichische Nationalbank in May 2011
- Retail payments - integration and innovation, summary of a joint conference by the ECB and De Nederlandsche Bank in May 2009
- E-payments without frontiers, ECB issues paper for a conference on retail payments innovation, October 2004
- Electronification of payments in Europe, ECB Monthly Bulletin article, May 2003
- Report on Electronic Money, August 1998
- Report to the Council of the European Monetary Institute on prepaid Cards, Working Group on EU Payment Systems, May 1994