PARIS–A new effort is underway in Europe to challenge the dominance of the biggest players in payments.
The European Payments Initiative (EPI) is a response to the huge players in payments—Visa, Mastercard, and Chinese and U.S.-based tech firms—and similar efforts have been attempted before. But one analyst says this latest initiative may prove to be a “genuine alternative.”
Writing on Forbes.com, David G.W. Birch said what is different this time around is the pandemic will accelerate the transition to contact-free, in-app, omni-channel payments.
Birch noted the plan was originally backed by 20 French and German banks with a goal of building a unified pan-European payment system, offering a card for consumers and merchants across Europe, a digital wallet and P2P payments. “The banks…are all serious players and can put muscle behind the initiative so unlike previous attempts at a third scheme, this one has legs,” stated Birch.
Birch said EPI falls under what he calls a “third scheme” that is based on the modern infrastructure technology, including “request to pay” and push-only credit transfer across borders whether through the interconnection of national instant credit transfer networks or through their bypassing because of digital currency.
“I think that such an infrastructure will be cheaper to operate and better for consumers and merchants but I can also see that the dominance of card infrastructure in the short-term means that there is pressure for EPI to include this traditional payment mechanism as part of the scheme,” opined Birch. “It is not at clear to me, however, if this is really the right focus.”
Alternative Implementation
Birch noted that under the current regime a fraction of direct debits fail, resulting in what is a manual and expensive process, on top of expenses related to managing fraud.
“Now imagine an alternative implementation that uses an R2P platform,” suggested Birch. “There is no mandate and instead every month (my) gym uses R2P to send me a bill that shows up in my bank app. For the first couple of months I might look at the bill and then OK it, but I’ll get bored with that fairly quickly and just tell my bank that so long as the bill from the gym is less than £50 and it's only once a month then just go ahead and pay. At any time I'll be able to go into my bank app and look at the list of these consents and turn them on and off.”
Roadmap in Place
Assuming that R2P is implemented using a rich data ISO 20022 messaging structure, then the service that can be delivered to consumers and merchants is enhanced significantly, added Birch.
Birch noted the R2P roadmap has already been set out in the U.K. and at least one of the traditional payment providers, Mastercard, has already signed up to it. The European R2P roadmap is due out in November.