Post on 29-May-2020
transcript
Memorandum
According to Ms Oakes, friction between
competition and harmonisation alsoneeds to be addressed, and she asked
how a level playing field can be created
as well as network economics in acompetitive environment. She remarked
that after SEPA, the Payment ServicesDirective (PSD2) is now on the agenda. A
new focus on Instant Payments for the
Euro highlights the fact that speeding uppayment processes can also accelerate
the potential for fraud and othermalpractices, so it’s even more important
to harmonise standards and ensure
interoperability. She concluded by askinghow we can create a vision to determine
the direction that payments should take,in an era of unprecedented technological
development.
Ms Oakes opened the conference by saying
that this is an exciting stage in the
development of payment products and
services, with the digital agenda taking off
and financial technologies exploding. She said
that the EU Digital Single Market strategy is
looking at e-‐commerce across the entire
European Economic Area (EEA), and
payments is just one of the aspects of the
digital market. She suggested that competing
priorities need to be examined from a public
policy and regulatory perspective on the
concept of freedom for individuals and
businesses, and the security needed to make
this freedom possible.
Liz Oakes Director, Management Consulting, KPMG
2Memorandum - 3rd Annual QED Conference – The Future of EU Payments |
Panel 1 – Regulating EU payments
The recent interchange fee regulation was
necessary to address dysfunctions in core
markets and encourage the industry to adapt
to digitisation. Mr Salles said that new
trends and developments are constantlythrowing up new challenges and
opportunities, and one such technologythat is moving rapidly concerns mobile
and instant payments. In this area he
hopes that standards will be applied bythe end of 2016 for practical
implementation in 2017. He thereforeconsiders the next two years as critical,
as in this period PSD2 will be enforced
and will greatly impact the market andconsumers. Mr Salles mentioned the
importance of the green paper on retailfinancial services that was released in
December 2015, and on which he
welcomes feedback. He finished bysaying that regulators must be ready to
face all the new challenges in the area ofpayments in a pragmatic and open way.
Olivier SallesHead of Unit D3 - Retail Financial Services and Payments, DG FISMA, European Commission
Mr Salles said that until recently, legislation in
card payments focused on protecting
consumers and setting rules for licensing
(PSD1), fighting potential abusers (EU
Regulation 924), or setting standards across
borders (SEPA). The appearance of new
technologies, challenges and players, as well
as new supply-‐demand relations, has changed
the focus somewhat. Legislation has to
intervene and is potentially the only way
forward to address these changes. For
example, PSD2 which was adopted in mid-‐
January, is to a large extent the response to
the challenge brought about by the arrival of
new players.
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Mr Ainsworth described key implications
for legislators and politicians. He said thatinnovation needs certainty for investments
in payments, and the regulatory focus
should be on the consumer not theproduct. He stressed the importance of
trust, safety and security, and stated thatthere is a need for a sandbox approach
aligned to consistency to achieve a level
playing field. Also important is to thinkglobal and think standards rather than
solutions. His final point addressed theimportance of designing-in accessibility,
the inclusion of everybody, and offering
choice, so as not to leave people behindin the digital revolution.
Mr Ainsworth spoke about the possible
direction of payments over the next ten years
and shared a video on a contactless mobile
payment method implemented by Barclays in
the UK. He described some key payment
trends such as e-‐wallets, biometrics and
alternative currencies, and the four evolving
trends: form factor, channel, payment
journey and revenue model. He said that
shaped by seven key global megatrends,
changes in these characteristics will shape
consumer payments. He summarised these
changes as multi-‐source data, a buyer
payments layer, the sharing economy,
purchasing replacing paying, and just buyers
and sellers: the common theme being smart
and invisible data.
Alan Ainsworth Director, Government Relations, Barclays
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Presenting what he considers to be a
fundamental point about PSD2, Mr Schardt
said that it will revolutionise the European
payments market and bring security into the
payments market. It opens up the EU
payments market to new operators, thereby
fostering innovation and fair competition. He
considers therefore that PSD2 is an
opportunity rather than a threat for banks. It
will give them a valuable opportunity to
survive as consumer banks and offer new
services in the digital market.
Georg SchardtManaging Director, SOFORT
On the topic of Payment Initiation
Services (PIS), Mr Schardt considers thatit gives banks the opportunity to become
powerful actors in European e-commerce
and strengthen their customer relations.An example is PayPal which is now active
in 80 countries and which provides loansand a payment card. He said that e-
commerce is evolving extremely quickly
and banks cannot afford to wait; it’s theirduty to develop and deliver secure
systems that small merchants andentrepreneurs can use to set up a small
business, conduct cross-border business
and build up the internal market. MrSchardt said that the last available
infrastructure in the digital environment ispayments, and is an area in need of
efficient regulatory standards.
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Panel discussion - Regulating EU payments
Ms Oakes wondered what the starting
point would be on harmonising InstantPayments. Will it be right from the very
beginning rather than addressing it later
when a number of different systems mightexist? Mr Schardt said that SOFORT has
developed secure interfaces to more than4000 banks. At the same time, he pointed
out that SEPA is not yet properly
implemented, and some banks have noteven introduced basic customer
authentication procedures. So he thinksthe first direction is to make SEPA work.
He would also like to see the functionality
of a bank account become extended tocreate a wider range of products for the
merchant. Mr Salles said that work onInstant Payments standards has been
coordinated right from the beginning. It
includes all participants and aims toenable a minimum level of harmonisation
in the Eurozone, which he hopes will thenbe extended across the whole of the EU.
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A member of the audience asked whether
the green paper on retail financialservices is the last chance for the EC to
respond to the needs of the European
community in terms of sovereignty, dataprotection and data privacy, to avoid card
and mobile payments moving to Google,Amazon, PayPal, Facebook etc. Mr
Salles said the green paper is certainly
not the final answer of the EC. It aims toanticipate future evolution and the impact
of digitisation on financial services, so ismuch wider than payments and cards. It
does deal with the issues of data
protection and cybersecurity, and afterconsultation on the green paper all
feedback will be gathered to addressthese issues in a legislative answer.
Memorandum - 3rd Annual QED Conference – The Future of EU Payments |
A discussion followed on the reasons why
US companies such as Google, Amazon,PayPal and Facebook are so huge and
successful, and why no European
equivalents exist. Mr Ainsworth said thatthey are successful in Europe because
they provide what customers want. Thechallenge of European organisations is to
provide the enablers so we can compete
on the same terms as these companies.Another delegate asked how standards
can be put in place to ensure reliable,scalable and secure APIs that other
businesses can rely on the banks to
provide.
The panellists agreed that the challenge
is to get the balance right; to allowbusinesses to access data to provide
services to their customers, while
ensuring that others can’t access thatsame information and use it maliciously,
which needs a solid regulatoryenvironment. It was pointed out by
another delegate that a key principle is
that account holders decide who is gettingyour data, which is anchored in PSD2.
Another delegate commented that anopen API standard is crucial to create a
real open European environment, and
allows consumers to use the paymentmethods that they want to use.
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supported by Europol’s European
Cybercrime Centre, 35 airlines and 32countries, and took place at 109 airports.
It resulted in the reporting of 162
suspicious transactions and the detentionof 133 individuals under suspicion of
fraud. Three elements were essential toits success: a sound legal framework,
excellent cooperation, and funding for the
right tools and training. Ms Bauer-Bulstgave details of each of these three
elements and described what is stillmissing in each area. She invited the
financial sector to get more deeply
involved in combatting cybercrime, andrequested delegates and their companies
to communicate their input on where theysee gaps, and to contribute to DG
HOME’s processes to devise new rules
for the combatting of fraud andcounterfeiting of non-cash means of
payment.
Ms Bauer-‐Bulst explained that there is always
a balance to be struck between security and
convenience: perfect security may be
perfectly inconvenient! She listed various
security threats, including new ones such as
carding sites for the trafficking of credit card,
bank account and other personal information
online.
She then described a recent successful
operation: the Global Airline Action Day,which targeted criminals suspected of
fraudulently purchasing plane ticketsonline using stolen or fake credit card
data. It involved law enforcement
agencies from across the world,
Cathrin Bauer-‐BulstTeam Leader, Fight Against Cybercrime, DG HOME, European Commission
8Memorandum - 3rd Annual QED Conference – The Future of EU Payments |
Panel 2 – Online payments – Cyber security and data protection
He gave the example of Apple Pay: banks
see the transactions; Apple does not.Moreover, a bank needs to authenticate a
user of Apple Pay prior to that person
enrolling in it. Thus Mr Dechamps isconvinced that banks retain a vital role in
digital payments. He described four keyprinciples to achieve EMV-grade
(Europay, MasterCard and Visa) security
in digital environments, which heconsiders align well with the PSD2
guidelines. These are strong issuer-controlled authentication for wallet
provisioning; cards issued with tokenized
EMV-capable electronic credentials;strong authentication for wallet/device log-
in (including device-based userverification); and signature of transactions
with dynamic data.
“Digital payments are forecast to triple by
2020,” announced Mr Dechamps, “with
particular growth in mobile contactless
transactions, in-‐app payments, and browser
based payments.” Going forward, people will
not only use their card at point-‐of-‐sale, but on
multiple devices, mainly smartphones but
other devices in the future. This leads to a
major security challenge because card details
stored in multiple devices means multiple
points for compromise. He said that two
important aspects are who controls the user
experience at the moment of transaction,
and who sees the data.
David DechampsGroup Head Emerging Payments Europe, MasterCard
9Memorandum - 3rd Annual QED Conference – The Future of EU Payments |
Regarding instant payments, he defined
these as electronic retail paymentsolutions that are available 24/7/365 and
which result in immediate interbank
clearing of the transaction and crediting ofthe payee’s account. In this area he would
like to see conformity at pan-Europeanlevel instead of many different solutions at
national level. He described work being
done to develop a layered approach, andexplained some aspects of the work that
needs to be done on the clearing andsettlement side. He said that these are
discussions taking place, although he
admits that we are in highly challengingtimes. From an ECB perspective, he very
much hopes that clarity is going to beprovided regarding market integration and
that the work currently taking place will
lead to pan-European instantpayments.
Mr Tur Hartmann focused on the topic of
online payments, which he considers a
positive evolution for e-‐commerce and
today’s changing society. He noted that cards
were initially not built to resist the challenges
of the online world. E-‐wallets are now
appearing, and in some countries Payment
Initiation Services are already present even
before PSD2; all of which indicates that things
are happening, but the field is far from stable.
He considers PSD2 a welcome initiative, as is
PIS, although one of the challenges that Mr
Tur Hartmann sees is potential
fragmentation.
Francisco Tur Hartmann Deputy Head of the Market Integration Division, European Central Bank
10 | Memorandum - 3rd Annual QED Conference – The Future of EU Payments
Mr Alfing sees many trends and new
technologies approaching, which will change
the European payments landscape and
consumer behaviour, and blur the line
between offline and online in retail. Also for
payments methods is omni channel the new
norm, and the challenge is how to adapt to
these changes. He said that new payment
methods are needed, and gave the example
of credit cards, which were developed for the
offline world and had to be adjusted for the
online world; here the challenge is to make
something new.
Paul AlfingChairman of the e-Payments Committee, Ecommerce Europe
This, according to Mr Alfing, requires a
change in perspective, by consideringwhat the consumer wants as the starting
point and then working towards a
seamless and convenient shoppingexperience. Mr Alfing is aware that a
recurring topic is convenience versussecurity, for which he agrees there is no
easy answer. He considers the
development of biometrics presents agreat opportunity for seamless
shopping/one-click buying. It alsodemands the importance of further
standardisation, as biometrics will have a
huge impact on the online world. Finallyhe stressed that for consumers and
merchants, ease of use remains of criticalimportance, because if a payment system
is not easy to use it simply will not be
used.
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Panel discussion - Online payments – Cyber security and data
protection
The Moderator kicked off the discussion
by asking if consumers understand whatto do when things go wrong with digital
payments. Mr Alfing replied that ideally
consumers should not have to understandall the technical implications of a payment
method, but should contact their merchantin case of dispute, who will come up with
a solution. Mr Dechamps added that in his
opinion, consumers have not beenadequately informed as to the high level
of protection that already exists with cardpayments, such as zero liability for
MasterCard cards. Mr Tur Hartmann
pointed out that this level of protection isnot so clear in case of online purchases
through websites (and payment solutions)outside the EU. Furthermore, panellists
noted that in the increasingly global world,
things are becoming even more complex,as they involve purchasing between
continents, which makes it more difficultto contact merchants.
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Mr Dechamps commented that the mobile
world needs to provide more added value,for example by giving consumers more
control over their transactions. He would
also like to see consumers being providedwith greater flexibility and a wider array of
services in the way they can pay.The Moderator expressed concern about the
large amounts of personal data on their
customers that retailers collect and store. Mr
Alfing pointed out that most merchants only
collect those data that are needed for a
transaction and that data mining is not their
core business. And for certain types of data,
the consumer has to give their consent to the
retailer to collect that information, and are
not then allowed to sell that data onwards.
Memorandum - 3rd Annual QED Conference – The Future of EU Payments |
Ms Bauer-Bulst said that customer
information being exposed is notexclusive to online merchants; there is a
vast amount of data available online on
people that has nothing to do with theirpurchasing behaviour. She said that that
the new General Data ProtectionRegulation will set common standards,
plus the empowerment of data protection
authorities at the national level, as shownby the recent example of the French
CNIL.The only question from the floor was on
the risks associated with virtual
currencies. Ms Bauer-Bulst expressedexcitement about Blockchain technology
especially in terms of authenticationopportunities. However, she sees Bitcoin
heavily used in a criminal context.
For example, all the carding sites are run
on Bitcoin, which is unfortunate as Bitcoinand other currencies present new
opportunities in dealing with payments.
She said that the Commission, as part ofits evaluation and impact assessment
process, is actively looking at how to dealwith the abuse of virtual currencies in
designing a common framework for the
fight against non-cash payment fraud inthe EU. Mr Alfing agreed that Blockchain
technology has great potential for thepayments infrastructure and other
technical solutions. Bitcoin can be an
interesting currency for merchants toreach for specific groups, but Mr Alfing
always advises his members not to keepa bitcoin account but be paid in Euros due
to the high volatility of Bitcoins.
13Memorandum - 3rd Annual QED Conference – The Future of EU Payments |
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