Last week, the European Central Bank (ECB) confirmed new measures that will enable non-Payment Service Providers (PSPs) to access central bank payment rails.
This new ruling will prove to be pivotal for the growth of a myriad of European fintechs and neobanks, as well as merchants and non-traditional financial institutions that use payment options via embedded finance to serve customers with their own payment infrastructure.
Jonathan Arler, General Manager, Netherlands of payment gateway payabl., believes that this new ECB rule will create a “more inclusive and competitive European payments landscape”.
He told Payment Expert: “The new policy introduced by the European Central Bank is certainly a forward-looking step towards creating a more inclusive and competitive European payments landscape.
“The new harmonised approach aligns seamlessly with the ever-changing needs of a more digital-first economy, which fosters efficiency and innovation in retail payments across the continent.”
What this means also for non-PSPs is access to the ECB’s TARGET, with companies looking to implement the payment service falling under new regulatory guidelines as part of the Payment Services Directive 3 (PSD3).
Furthermore, the guidelines also enable financial services and non-PSPs to integrate the instant payment rail TIPS. The facilitation of this rail will also fall under new guidelines set to be mapped out under the Eurosystem’s Instant Payment Rails regulations.
Although these new measures will not come into force by April 2025, the adoption of both these payment rails can create new opportunities for non-PSPs and others, such as payabl., to streamline its payment processes more efficiently than ever before.
Arler said: “Starting April 2025, non-bank PSPs will be able to directly access TARGET Services. This means companies like ours can handle settlements more efficiently and continue to innovate in the retail payments market.
“It’s a big win for the adoption of instant payments across the EU and aligns perfectly with the fast-paced digital economy.”
The new rules also beg the question whether this will accelerate consumer use of non-traditional banking and financial services, which has significantly increased over the past several years due to the surge in companies integrating embedded finance.
Juniper Research found that embedded finance revenue will rise from $92bn in 2024 to $228bn by 2028, a seismic 148% increase over the next four years.
Its research last April also found that this increasing adoption has been fuelled by the likes of more market demand for multi-rail payment options, as well as leveraging more Open Banking APIs as they become more mature.
But whilst the European payment landscape continues to evolve via these new rules, Arler, despite acknowledging the forward-thinking approach, pondered whether access will be as straightforward for non-PSPs to access these central bank rails.
He concluded: “While the amended Payment Services Directive also introduces the option to safeguard users’ funds at central banks, the Eurosystem isn’t offering this just yet. Still, it shows a forward-thinking approach to financial security, and we’re looking forward to future developments.
“This new policy is a significant step for the entire financial ecosystem. It embodies the spirit of innovation and collaboration that drives progress in our industry. However, practically, the big question remains how the requirements set out by the ECB can be materialised by the non-bank PSPs, to be granted access to the rails.”
