Growth Potential and Competition in the Card Payments Sector

19 January 2016

On 18 January, Yves Mersch, Member of the Executive Board of the ECB, gave a keynote speech on card payments in Europe.

In his opening remarks, he recalled that besides cash, card payments are the most widely used payment instrument in Europe. Despite new payment solutions, there is a huge growth potential for card transactions in the European Union and in particular in central and south-eastern Europe.

In order to unleash this growth potential, he claimed the Single Euro Payments Area (SEPA) for cards has to become a reality. It will allow a harmonised, competitive and innovation cards payment area. Three areas are critical to its realisation: standardisation, interoperability and security. When it comes to security, Yves Mersch observed that two-thirds of all fraud losses on cards issued within SEPA countries is related to CNP transactions. To fix it, the implementation of strong customer authentication is indispensable.

Another interesting trend is the emergence of innovative payment solutions. This new competition will impact the usage of cards, the payment behaviour and will pose many challenges. For instance, the distributed ledger technologies (as Blockchain) could have a strong impact on the whole financial system.

All these innovations mean more choice for consumers and businesses. But the payment solutions have to be secure and efficient and play with the same rules. Yves Mersch said that the revised Directive on Payment Services (PSD2) and the interchange fees regulation (IFR) have laid down the needed rules and provide the required clarity.