After a delayed first attempt to launch a European alternative to dominant payment systems — VISA, Mastercard, and the like — the European Payments Initiative (EPI) is back in the news.
The EPI is gearing up to pilot an instant payments and digital wallet system by the end of the year. This comes after it agreed to acquire two fintechs, Dutch payment scheme iDEAL and Luxembourg-based mobile payments app Payconiq. With 50% of retail transactions still done by cash in Europe and an intricate web of compliance to navigate, EPI is facing considerable challenges in its ambition to become a new standard in payments.
Will the made-by-Europeans, for-Europeans initiative succeed? What impact will it have on the Eurozone, and can it keep up with industry leaders like Google and Apple Pay?
Thomas Müller of Swiss payments resolution regtech Rivero AG joined the Converge podcast to discuss the project and how it might impact competition and cooperation across Europe.
Bringing more choice to consumers
With established players like PayPal, VISA, Mastercard, Google, and Apple Pay already dominating the European market, is there even a real need for a Euro-specific alternative?
Thomas Müller believes that “there is not necessarily a need for [it]….However, competition is good and choice to the consumer is good.” Competition breeds innovation and ultimately benefits the consumer who is left with an array of quality choices. From this perspective, a challenge to the current market of dominant US-based payments solutions is welcome.
In fact, it is likely that the EPI’s change of scope was in part provoked by the lack of true need. Initially intending to take on the titans of the industry, the EPI narrowed its focus to instant payments that would build on top of existing solutions developed by their acquisitions, iDEAL and Payconiq.
“I believe the approach they have chosen now…is a wise choice and a good starting point,” says Müller.
A competitive edge in compliance?
Tech development aside, the EPI faces another significant challenge: efficiently and effectively bringing all players into their payment ecosystem to ensure that the transactions are vitally available to consumers.
“They have to motivate enough merchants and payment service providers to integrate [EPI’s] payment option into their checkout solutions,” explains Müller.
This is where compliance comes into play. The EPI needs to align with local regulations and build its own framework — and perhaps it can draw know-how from its competitors who faced similar challenges, suggests Müller. “This is an opportunity to not just copy, but to copy and improve the process.”
And while local governments might seem like an additional hurdle, they have the power to be important cooperation partners by exercising positive pressure on banks to adopt the EPI’s payment rails.
Amid stiff competition in the payments space, it’s hard to predict whether the EPI will carve out its own significant user base. Ultimately, “given their ambition to ‘only cover European markets’,” Müller says, “even if [the EPI] is successful, it will be mainly one addition to the options we have as a consumer.”
Want more insights on the topics shaping the future of cross-border payments? Tune in to Converge, with new episodes every Wednesday.