European Payments Initiative: learning from previous mistakes

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The European Payments Initiative, EPI was initially meant to develop joint payments frameworks rather than searching for a balancing instrument in interoperability of heterogeneous domestic solutions. However, the EPI has been under severe scrutiny since the opt-out of several European banks. The EPI could still play a vital role in stimulating EU’s payment system and help diminish the market fragmentation. 

Although the concerns about any feasible solutions are numerous, the future of the autonomous Eurozone payment infrastructure is still doubtful: the diminished capacity of the initiative might be a blessing in disguise as the project scope can be adjusted, helping grow and empower the European Payments system.
Innovation in the European payments industry is a focal point of EPI, contra to focusing on Visa & MasterCard dominance in Europe and searching for an ‘antidote’ solution; with certain adjustment, EPI can achieve its desired goal of increased payment homogeneity in the EU by supporting and growing already existing financial systems, instead of focusing on a search for one magic bullet, argued experts in Local Payment Methods of fintech Nikulipe.
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Note: Nikulipe is a Fintech company that facilitates Emerging and Fast-Growing market access for Fintechs, Payment Service Providers, and their merchants by streamlining cross-border payment solutions. Established in 2019, Nikulipe was founded by serial entrepreneurs and Unicorn Founders, who have vast experience in the Fintech-industry, with direct expertise in payment industry technology and business development.

EPI initiative: history
The EPI project was kick-started by the European Commission back in 1999, and initially it was well received in line with its far-reaching scope of creating a “unified payment area covering the whole EU, that unifies fragmented local payment solutions into one that allows cross-border payments without friction”. However, the focus to unify payments was soon linked with another trend: offering an alternative to European consumers and traders being highly dependent on the US payment providers. For example, presently, over 60 percent of payment card transactions in Europe are made via Visa and MasterCard systems.
EPI had been oriented towards consumer’s interest: to provide one card, password and one app for authorization covering all payment solutions across Europe. Having such a solution would facilitate additionally EU-wide identity verification and even supporting a digital European currency; furthermore such a system would ultimately have the potential to save costs for the traders and the banks, as well as reducing EU’s dependence on the US card schemes.
Unfortunately, the initial EPI’s scope, as well similar projects like the Euro Alliance of Payment Schemes, often called the Monnet Project; the lofty ambition was estimated to cost over € 2 billion (as well as other complications), which the member states’ banks did not want to take on. Such a long-term political endeavor should also have had adequate funding from relevant institutions; otherwise there is just not enough benefit for the banks to enter the deal.

Redefining the scope
Subsequent to half of the member states’ banks having pulled out, it seems the EPI has a second chance: instead of putting all the efforts towards one overly ambitious goal, the remaining members can help strengthen and support the existing ecosystem, which would support new innovative solutions acceptable for the EU-wide market. A lot has happened since 1999: e.g. the value of digital payments in Europe reaches more than 30% of all transactions and many innovative Fintechs are taking advantage of this trend by trying to eliminate the need to use card readers. In parallel, innovative payment solutions like A2A payments, or integrated Wallets are moving towards border consumer adoption.

The EPI should learn from the past and drive change by means of collaboration serving as a unique opportunity for success if focus on consumer and industry player feedback will prevail. When EPI was launched, consumers were not consulted; now it’s time to correct the mistakes and get consumers more engaged in discussions.

European Banks through Open Banking & SEPA
There are other directions where the EPI could take a leadership role in the context of creating a complete Eurozone payment infrastructure, driven by the goal of increased market homogeneity. Open Banking (OB) has become a symbol of innovation for the European financial industry but in reality, adoption and acceptance has a wide discrepancy between countries — yet just 5-7% of Europeans have ever used open banking solutions.
EU-27 has had good examples for achievements in OB adoption but the regulation across the continent is not balanced. The ECB directive to make API connections available by banks to Fintechs was a good initiative; but there is no serious enforcement to level the innovation in each country. More initiatives are needed, like instant SEPA, to be supported by the member states.
In conclusion, at the end of the day (in July 2022), the number of initiatives should not stop ‘half-way’; if the goal is to achieve a unified payment infrastructure in Europe, it should not depend on a single initiative but rather on continuous hard work of European institutions, banks and financial innovators in “flourishing the system”. With much needed public funding and renewed enthusiasm the renewed EPI could be an innovative project in the European Payments system.

Perspective payment options in the Baltics
As a payment method, banking provides an easy way to access the fast-growing Baltics’ market by allowing consumers to use their favorite payment methods. A single and tailored to local needs payment solution could help to reach out to about 6 million customers in the three Baltic States.
The Baltics are one of the fastest-growing e-commerce regions: hence, the ability to understand local payment methods is crucial in reaching their broader base of clients. With a new system called “banklinq”, tailoring transactions to regional complexities could be more optimal and convenient.
The Baltic’s market is growing: retail value growth in the region by 2025 is expected at 45 percent, about 70 percent of the population is having bank accounts, and yearly growth in e-commerce is 14 percent; and total market size of the region is about €49 billion.


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