What is new with innovative payments?

Transcription

1 What is new with innovative payments? Monika E. Hartmann Payment System Policy Division Directorate General Payment Systems and Market Infrastructure Frankfurt am Main 10 November 2004

2 Presentation outline 1. Scope what signifies innovative e-payments? 2. Observations what is new? 3. Challenges what are the issues? 4. Conclusions and outlook

3 1. Scope What signifies innovative e-payments? novátorský (CZ) nyskabende (DK) innovatief (NL) innovateur (FR) innovativ (DE) (GR) újító (HU) innovativo (IT) inovador (PT) innovador (ES) nyskapande (SE) Depending on the background innovative can mean something different in each country relative strengths and weaknesses inertia and market access efficiency potential uncovered markets / needs

4 2. Observations What s new with e-payments? Potentially a lot A classification approach E-payments Based on Basic payment instruments New payment instruments and related services Concepts based on credit transfers, direct debits (excluding cards), credit card payments, debit card payments E-money & pre-funded payments, cumulative collection services, payment portals & integrated payment solutions, mobile payments Based on basic payment instruments: existing payment instruments being transformed to serve new/changed market segments with no or only minor changes to the logic and procedures of the instrument. New e-payment related services: innovative arrangements that try to provide additional benefits and address emerging needs in new ways.

5 Why classification may not work New services widely relying on basic payment instruments (access to accounts remains a key) while technological development is mainly driven by non-banks Hybrid products: new combinations of instruments and bundling of services cause category overlaps Multichanneling: services via a broad set of channels Changing scopes: Co-opetition among competitors and strategic alliances between different types of institutions Role sharing models along the value chain

6 Reported figures below expectations Example: electronic money E-money values outstanding in the euro area, in million EUR % of cash in circulation 0.92 EUR per inhabitant Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 ECB monetary statistics (August 2004 preliminary)

7 with diverging stories of success Example: electronic money E-money transactions in EU-15 Per inhabitant, figures for 2002 (Blue Book 2004) 9 + (average: 11.7) 6-9 (average: 6.3) 3-6 (average: 5.4) - 2 (average: 0.4) Highest in Belgium, 11.7 EU-15 average: 1.2 transactions

8 and predominant-looking traditional instruments Relative use of cashless payment instruments in EU-25, according to total number of transactions (2002 figures) Card-based e-money 1% Cheques 15% Direct debits 23% Credit/debit cards 31% Credit transfers 30% Blue Books addendum incorporating 2002 figures (2004)

9 but innovative electronic usage influences dynamics Relative use of cashless payment instruments in EU-25, according to total number of transactions (2002 figures) B2C (+ new: P2P) Direct debits 23% Card-based e-money 1% Cheques 15% Paper-based P2P, B2C, B2B B2C P2P, B2B, new: integrated B2C Credit transfers 30% Credit/debit cards 31% B2C (e-commerce, cash substitution), new: P2P Blue Books addendum incorporating 2002 figures (2004)

10 3. Challenges for a mature and integrated e-payments market Balancing interest between parties Managing co-opetition in networks Prospects for a domestic e-payments market in the SEPA Pricing, cost and efficiency Security and risk challenges

11 Balancing interest between parties Identifying needs and preferences Timing and speed of payment and delivery Cost risk distribution Knowledge and mutual trust base

12 Managing co-opetition in networks Co-operation between competitors Need for standards: drivers of efficiency, critical mass Interconnection between accounts and access to settlement media Complex management of cross-industry joint ventures Cost-risk-revenue sharing along value chains

13 Prospects for a domestic e-payments market in the SEPA Single Euro Payments Area as vision but still fragmentation especially in retail payments Elimination of border effects Integrated payments market as common goal of banking industry, European Commission and Eurosystem SEPA-progress of banks as important factor

14 E-payments and SEPA? Results of a survey among providers (EU-25) (ECB/ePSO 2004, N=170 schemes) > 20% of all services are offered in more than one EU country > 80% offer denomination in euro > 50% of services open for cross-border use

15 5. Conclusions 1. Innovation is happening! 2. Potential drivers towards an e-payments market without frontiers Policy: single currency and common market framework Business incentives: efficiency gains, economies of scale Demand factors: convenience, variety of options

16 and outlook And here, poor fool! with all my lore I stand, no wiser than before Why do national borders (still) matter for e-payment services? Can e-payment services be a driver of the SEPA process, and/or it s beneficiaries? What drives the demand for pan-european e-payment solutions?

17 Have a look or discussion at the e-payment Systems Observatory Thank you for your attention! Questions?

18 Backup slides

19 Working definitions e-payments E-payments are payments that are initiated, processed and received electronically. A payment is the payer s transfer of a monetary claim on a party acceptable to the payee An acceptable monetary claim is a means of payment Payment instruments are tools and procedures to initiate the transfer of the means of payment Payments initiated through mobile phones and other wireless communication devices are called mobile payments. They are a sub-group of electronic payments. Clearing is the process of transmitting, reconciling and, in some cases, confirming payment orders prior to settlement. Settlement is an act of discharging obligations related to payment transactions between two or more parties.

20 E-payments value chain Acquisition phase Payment initiation phase Processing phase Payee acquisition User authentication Authorisation & risk management Payer acquisition Access & data transport Routing, clearing & settlement Governance and management of system Ownership, rules, standards ++ connections with underlying business transactions

21 Policy Issues (National) fee structures Interpretation and implementation of Community Law (e.g. E-Money Directive) Still considerable heterogeneity of legal and regulatory systems New Legal Framework for Payments, an initiative by the European Commission

22 Regulatory framework What matters for central banks? Acquisition phase Payee acquisition Payer acquisition Payment initiation phase Smooth functioning Issuance of means of payment User authentication Efficiency SEPA Access & data transport Processing phase Authorisation & risk management Routing, clearing & settlement Governance and management of system Ownership, rules, standards

23 What matters for central banks? Issuance of means of payment Basic payment instruments: central bank money, commercial bank money New payment instruments and related services: commercial bank money, e-money, company money

24 E-Payments in euro without frontiers? Total non-cash payments in the euro area Per inhabitant, figures for 2002 (Blue Book 2004) >> Non-cash countries Highest in France, 218

25 E-Payments in euro without frontiers? Debit and credit card transactions in the euro area Per inhabitant, figures for 2002 (Blue Book 2004) >> Card countries Highest in Finland, 94

26 E-Payments in euro without frontiers? Credit transfers in the euro area Per inhabitant, figures for 2002 (Blue Book 2004) >> Credit transfer countries Highest in Finland, 102

27 E-Payments in euro without frontiers? Direct debits in the euro area Per inhabitant, figures for 2002 (Blue Book 2004) >> Direct debit countries Highest in the Netherlands, 58

28 E-Payments without frontiers? Cheques in EU15 Per inhabitant, figures for 2002 (Blue Book 2004) >> Cheque countries in EU (75) (40) (avg 22) - 19 (avg 3) Highest in France, 75 EU15 average: 20 transactions

29 SEPA Where do banking communities stand? 3rd EPC Report / SEPA Indicators (30 June 2004) No. of banks subscribing to: Implementation of: Country Credeuro ICP IBAN ** BIC ** PEACH*** AT % 100% 100% BE % 100% 100% DK % 100% 100% DE * % 100% 100% ES % 99% 100% FI % 100% 100% FR * % 100% 100% GR % 100% 100% IE % 100% 99% IT % 90% 100% LU % 100% 100% NL * % 100% 100% PT % 99% 100% SE * % 95% 100% UK % 71% 100% * In DE, FR and SE all banks have adopted ICP nationally. Thus, the figures indicated are the total number of credit institutions 2002 according to the Blue Book, April 2004 ** Percentage of financial institutions that make available to their customers IBAN and BIC automatically and on a permanent basis, via their account statements *** Percentage of credit institution that could be reached through the PEACH [1] Representing approximately 70% of cross-border volume. Sum

30 Country Service providers & EU regulation Licensing rules in the field of payment activities (extract) Credit cards General purpose Credit / Company cards M-payment Premium Rate Services Denmark No license No license Credit institution license / exemptions Germany Financial services institution license Greece License No regime No regime M-payment Buying goods or services No license No regime No regime Financial services institution license Spain No regime No regime No experience / e-money license No regime France Credit institution No regime Currently examining License Ireland Credit institution No regime E-money or telco. sup. Italy Credit institution No license Credit institution Credit institution Netherlands License License Under discussion No regime Austria License No license No license No licensing Finland No license No license Licence / exemptions No position Sweden No license No license E-money / other license No license UK License License Under discussion No position Norway Credit institution No licensing No position Based on Questionnaire on the right to provide payment services to the public by the EU Commission, DG-Market in December 2002, MARKT/4011/2002