The EPI halting plans to act as an EU replacement for Visa and Mastercard undoubtedly marked a significant change of course for the initiative.
However, we spoke to Dean Wallace, Director, Consumer Payments Modernisation, ACI Worldwide, who analysed what the future could hold for the initiative and why banking players opted to pull out.
PaymentExpert: Can you tell us a little more about why you believe the EPI was abandoned as a replacement for Visa and Mastercard?
Dean Wallace: There’s no doubt the EPI will have had good reasons for abandoning their focus on cards. It was always going to be a challenge to create a new card scheme which would operate multi-laterally across European markets, dictated by a scheme of rules in the centre, but operated by multiple interdependent domestic operators.
Furthermore, the need to update merchant infrastructure across the entire bloc would require a costly and lengthy set up for the industry. And would have been based on the mantra “old is best, we just need to Europeanise it” built upon decades’ old concepts (plastic cards at point of sale) without visibly improving the experience for merchants or consumers in any (at least at the outset) ground-shakingly noticeable way.
While EPI did have plans for a digital wallet and real-time payments, its heavy bias towards cards was unrealistic given today’s evolution to real-time and digital payments.
EPI’s newly doubled-down focus on real-time and digital is comparable to the consumer payments modernisation trends we are witnessing outside of Europe too. Other markets such as India and Brazil have seen massive success by leaving cards alone, and instead implementing real-time and digital payments experiences.
This has driven immense transaction growth and habitual change in those markets as consumers and businesses alike have moved to use a vastly simplified, cheaper, and enhanced customer experience using easy to use, distribute and maintain digital wallets that ride the instant payment rails.
Of course, EPI’s plans are not ruined. By refocusing on where the bang will be worth the buck – digital and real-time payments enabled through wallets – execution and subsequent adoption will be stronger.
PE: What are the lessons you believe can be learned from the EPI’s progress so far?
DW: There are a number of very positive behaviours we have seen with EPI that are strong lessons for others to learn from. EPI has had, and still has, a strong bank and financial intermediaries backing, with some big hitters included in the initiative, such as Deutsche Bank and BNP Paribas.
This sort of “think tank” is exactly what is needed to get to the root of challenges to make a big initiative like this work in a market as complex as the EU.
Linking this to instant payments is another clear lesson, to modernise by building on top of existing modernisation. Perhaps this was one reason why the focus on cards was removed.
Although we cannot be sure, what is clear is that bringing such a big group together, including having public support from the European Central Bank, and enshrining the initiative into its own operating company, are all very strong and clear lessons for how to get something moving, as we are seeing with EPI.
PE: What do you believe the future holds for EPI within the payments space?
DW: We should expect to see real-time payment wallet services increasingly coming to the market, enabling integrated reach and connections across the EU zone. With Open APIs in place across the bloc and a high level of maturity in the market, I would expect to see some pretty cool wallet apps come to the market, as well as extend capability of some of the existing wallets. Wallets that users will start to adopt if they make their lives simpler or add value in some other way that is easy to understand and adopt.
I doubt this will be all coming from just the big banks though. We should expect to see some tech giants like Apple, Google and Amazon get involved. This will drive new capability into the hands of the consumer, and we’ll see merchants and billers clamoring to accept these new payment styles due to rising demand; much like we’ve seen with Buy-Now-Pay-Later in the last few years. We’ll also need to see enhancements targeted to merchants and billers to make their operating lives easier and more efficient/effective.
That said, it will be interesting to see how quickly such a roll out will occur. Making a mass market habit change like this is hard without some form of mandate, or seismic event like COVID-19, in place to push the change.
We have seen smaller scale capabilities around the world bite the bullet quite early on, but we have also seen some linger and limp on with PE investment. There have been some massive jumps in countries like India (UPI) and Brail (PIX), both of which had some form or market mandate behind them.
PE: How crucial do you believe e-wallets will become within the payments sector?
DW: That’s hard to say. It’s more a matter of how long will mobile wallets be crucial to the payments sector. Some firms would say they are now, with the likes of McDonalds and most high-street stores preferring a contactless transaction over anything else. But the move to using a mobile wallet (or eC-ommerce counterpart) for account-to-account payments in the EU is still a relatively new concept, especially when we consider it will need to work across multiple EU markets.
However, consumer habits are driven by the desire to make life more convenient, and all it will take is some big player like WhatsApp to step it up in the EU, so the banks feel forced to follow suit to prevent being disintermediated.
Combined with a big EU-wide advertising campaign, you can see a new world rollout of this capability for sure. Perhaps the bigger question would be, “will mobile wallets become crucial in the EU payments sector without some form of EU mandate” – that would really rock the EU payments world if that were to happen.