‘The transformation of the European payments landscape’

On 17 Oct ’18 SWIFT published the white paper ‘The transformation of the European payments landscape’. The white paper examines the drivers of payments transformation in Europe and looks at the challenges and opportunities for financial institutions.

 The paper examines the drivers for change in the payments sector, both global and European levels, and outlines the challenges and opportunities for incumbents in a market that is undergoing the most extensive transformation ever:

• Digitisation is driving expectations for fast, frictionless and borderless payments that are embedded in transaction chains and eco-systems, whether for retail purchases or business transactions
• Technology, which is offering opportunities for innovation and efficiency is also enabling competitors – fintechs, global retail giants, card networks and digital start-up banks – to challenge incumbent providers and existing business models
• Regulators are intervening to foster competition, protect consumer rights and promote payments efficiency and innovation, for example, by requiring banks to open customer data to third party providers for account information and payment services (open banking)

 The paper described the familiar key global trends:

• Open banking
• Instant payments and faster cross-border payments will lead to payments convergence
• Redesign and renewal of payment market infrastructures supports innovation
• Global adoption of ISO 20022 for financial services is a game-changer

 Next it is stated that regulatory drivers are putting Europe at the cutting edge of payments transformation. PSD2 and open banking, instant payments and market infrastructure renewal (e.g. Eurosystem vision2020) are presenting FIs with operational and strategic challenges.

 Payments transformation is forcing FIs to make strategic choices based on their scale, customer base and product strengths. Mid-sized banks are particularly challenged. To retain and win business in the new European landscape, FIs will need to choose the right partners, focus keenly on operational efficiency and collaborate at industry level to reduce the costs of compliance and benefit from technology change.

 The paper includes a ‘vision for the future’ from the following Financial institutions: BNP Paribas, Deutsche Bank, ING, Sberbank and Unicredit. ING states that the most important game changer in the European payments landscape are the changing customer expectations based on digitalised services in a more open banking environment, where speed and transparency are key (‘Being relevant in payment services: a fascinating customer journey’).

Click here for the SWIFT press release

*With great thanks to my colleague Angeli Kokkes of our Markets Instructures Department