Our world is increasingly connected, and this brings with it an increased demand for digital solutions. This includes payments, with consumers now expecting them to be faster, more convenient and more secure than ever. Instant payments promise not only to meet these expectations but also surpass the capabilities of any current method of payment. It is on this basis that the European Payments Initiative (EPI) aims to change the way Europe pays.
Arnaud Crouzet (AC), Vice President of Fime Consulting, recently spoke with Ludovic Francesconi (LF), Chief Member and Strategy Office at EPI Company, about the main challenges payments are facing today in a fragmented ecosystem, and how EPI is the clear next step for Europe.
Arnaud Crouzet: Ludovic, could you begin by telling us about who EPI is and how it sees the current payments landscape in Europe?
Ludovic Francesconi: Europe has a rich tradition of strong domestic payment schemes and payment solutions. A myriad of central banks, Payment Service Providers (PSPs) and other financial institutions each bring unique value to this flourishing ecosystem. However, this diversity also introduces fragmentation. Pan-European payments must abide by multiple sets of standards and regulations, making them unnecessarily complex. This additional friction reduces the attractiveness of domestic payment schemes, leading many players to opt for the larger international schemes instead.
EPI aims to address this fragmentation. 16 banks and financial services companies have already come together to create a new standard in payments for European consumers and merchants. It aims to address all types of retail transactions including in-store, online, and person-to-person.
Central to this is the creation of EPI’s innovative digital wallet solution, Wero. This aims to give domestic markets the digital solution users are demanding to rival the major international schemes. Additionally, it offers a solution for cross-border payments in Europe, which is currently unavailable.
AC: How does this address the market demand for instant payments?
LF: EPI’s solution is built on stringent consent management protocols. It is based on the European Payments Council’s SEPA Instant Credit Transfer scheme, known as SCT Inst. It uses an account-to-account framework upon which EPI has defined scheme rules that help manage all potential use case scenarios. It consists of three key messages. The first is a consent message, which can be seen as the equivalent of EMV® 3-D Secure for cards with enhanced flexibility and richer user experience. The second is a payment request, similar to a card authorisation request. The third involves an SCT Inst capture managed directly by the bank.
This is both innovative and very important as it allows us to respond to all the different payment scenarios and use cases. From the start, person-to-person transactions will be made seamless, with the possibility to both send and request funds via QR codes, emails or even text messages. We will then be able to evolve this functionality for business use cases too.
EPI will also make payments easier for online channels. eCommerce users will be able to initiate their payment by scanning a QR code. If the transaction is taking place on the user’s phone, they will be automatically re-directed between the eCommerce site and their banking app (or Wero app) quickly and securely. Additionally, bills and invoices will be able to give users a QR code to pay instantly, while in-store payments will also stand to benefit from both QR code and NFC payments.
AC: What advantages does this give over solutions already on the market?
LF: EPI’s approach facilitates true real-time account-to-account payments without any intermediaries. This gives the user more control, visibility and choice over their preferred payment method. It can also provide the user with key information about their account, including their overall balance, before making a payment. This means that for both personal and business accounts, users can feel confident in their transactions thanks to enhanced transparency.
AC: How will EPI’s solution help resolve any potential payments disputes?
LF: Having the means to settle disputes efficiently is a key component of any payment solution. But this starts with trying to avoid disputes as much as possible to begin with. By giving the user making the payment as much information as possible in the payment details – the merchant's commercial name, logo, location, and more, while still respecting the recipient’s data privacy – users can feel confident their money is being sent to the right place.
In the event of a dispute, the customer can first contact the merchant, supported by data provided by EPI. If the issue is not resolved, a straightforward pre-dispute or chargeback process can be initiated, giving both the customer and merchant the opportunity to justify their claim and challenge that of the other side.
In this way, EPI makes a payment much more secure from the very beginning of the transaction while also adding a chargeback capability to instant payment rails that were not initially designed for this. This enhanced protection and provisions for both customers and merchants means that EPI can also aid in any commercial disputes. This is an important differentiator compared to existing rails for digital payments that do not provide the same support.
AC: What is next for EPI?
LF: As we consolidate the initial adoption of EPI solution for market launch, we will also be looking to the future. Our goal is to make sure that our offering is able to evolve and grow to meet the ever-changing needs of the payments ecosystem. We are already considering how to integrate digital identity or loyalty features into the Wero wallet, and, of course, the future Ditital Euro. This ensures that we continue to give banks, PSPs, financial service providers and merchants the tools they need to succeed.
In a very fragmented card payment landscape, the benefits of speed, convenience, transparency and security that instant payments can provide is clear. However, ensuring that this new approach is adopted en masse relies on creating a strong framework at the European level that addresses the current fragmentation.
While some national card players continue to force the market with their own proprietary protocols, standardization is crucial for the future of instant payments and QR-code-based payments. Collaborative efforts, such as that of EPI, bring together stakeholders from across the payments landscape to ensure that this standardization exists, offering a new breath of innovation and opportunity in a payments field.