Europe – forerunner in digital payments

Payments are a key item on the EU Commission’s agenda. Finance Finland (FFI) appreciates the Commission’s Retail Payments Strategy with its aims of promoting a modern, digital and smooth retail payments market in Europe. Consumers and businesses must have access to a broad range of fast, easy and safe payment solutions.

The Commission is looking to speed up the development of pan-European instant payments, which will provide new competitive opportunities for payment service providers. The SEPA Instant Credit Transfer scheme (SCT Inst) will not be replacing traditional credit transfers any time soon, but will function alongside with them. Each bank can decide the types and fees of credit transfer services it offers to its customers.

If a deadline for joining SCT Inst scheme is set, a sufficient transitional period must also be provided. It does not operate in a void: closely related to the work on instant payments are also the measures to prevent money laundering, terrorist financing and fraud. FFI believes that crime prevention would strongly benefit from better cross-border information exchange between banks and supervisory authorities within the EU. FFI also endorses the Commission’s aim of strengthening the financial sector’s cyber security and digital operational resilience on a joint European basis.

Any SEPA bank can join the instant credit transfers scheme, which enables payments to be transferred from one account to another in mere seconds at any hour of the day. Real-time euro payments can also be made to non-euro SEPA countries such as Sweden.

Access to customer data must not be pushed

The Commission’s four-year strategy also envisages broader access to customer data. However, the previous, related reform of PSD2 is still fairly recent, and its impact and costs should be carefully and comprehensively assessed before the data interfaces are opened any further.

PSD2 does not, for example, treat third parties and the account-holding bank equally: data sharing must not only mean granting third parties access to financial sector data, but must also involve the careful evaluation of which third parties’ access to this data would be useful for the financial sector in turn.

Furthermore, PSD2 implementation is still incomplete, and its advantages will not become tangible in the market until later. The plans must ensure that customers have not only full power over the access to their personal data, but also unwavering trust in the security of the services.

Money is already digital

As digitalisation progresses in the society, the use of cash continues to diminish in favour of electronic payment methods. In its retail payments strategy, the Commission expresses its support for the ECB’s work on a central bank digital currency (CBDC).

The potential adoption of a CBDC should not side-line private business, however. The current monetary system based on banks’ deposit funds functions efficiently and provides customers with diverse and technically advanced services. The pros and cons of a CBDC must be carefully assessed before making any decisions for its adoption, and banks must be involved in the planning stage.

In Finland, cash is widely available to meet the needs of those without access to digital services. The availability of cash is guaranteed on market terms under official supervision, and therefore does not need to be regulated further.

The ideals of the Commission’s Retail Payments Strategy – such as non-discriminatory access to the technical structures and payment systems related to payment services provision – are good and supportable. All participants to the system must, however, be subject to the same rights, obligations and regulatory requirements, maintaining the principle of “same activity, same risks, same rules”. The measures proposed in the strategy will have significant financial and operative impact on the entire financial sector.

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Contact FFI experts

Infrastructure and Security

Inkeri Tolvanen

Head of Payment Systems