Something’s happening in the world of mobile payments in Europe. My colleague Med Ridha Ben Naceur explained our approach to “instant payments” a few days ago. And the framework conditions will soon be in place: The European Payments Council, the European Banking Association (EBA) and the European Central Bank (ECB) are working on a common standard for mobile payment processes. In future, it will be possible to use these across borders; the wish is for existing solutions to be implemented. And this year too. One standard instead of isolated solutions. Is the path ahead really smooth?
Let’s first sum up the technology again: With real-time P2P transfers, the payee is identified using their telephone number. The security aspects, i.e. registration and authentication, are taken care of by the bank. One key factor in this: everything is based on accounts that already exist. So this results in a real-time debit and credit, in other words an instant payment. We need an open solution for this, i.e. a solution that allows a new bank to connect to Jiffy and which will therefore ensure P2P transactions in the long-term with all participating banks. Payees that are not yet registered will also be invited automatically to use the service.
Jiffy meets recommendations of the Euro Retail Payments Board
This might seem simple at first glance, however certain framework conditions need to be put in place. After its second meeting at the start of December last year, the Euro Retail Payments Board issued the following recommendations: a new electronic payments system must be available 24 hours a day, seven days a week and 365 days a year. A real-time credit to the payment recipient with associated notification to the person making the payment should be assured, as should the independence of the various payment tools. The payment system must be usable anywhere. The settlement should, in turn, not take place in real time, but at the cut-off times. The payment system should not follow a “silo concept”, but rather a “layer concept”.
Our “Jiffy” solution, which we developed conjointly with SIA, meets all of these requirements and recommendations without any additional conditions. That’s because this is precisely where we see the problem: in Spain, for example, the banks have now grouped together to create a standardized platform. At first glance, this seems like a concept that should be aimed for. However if we first roll out the standardization of mobile payment concepts only at national level and then attempt to turn many concepts into a pan-European one, then we’ll run into problems. We see evidence of this every day on the financial market: the integration of all kinds of parties into a single market remains one of the biggest challenges facing the European Union. So we need to think across borders right from the start, including for the client’s sake.
Advantages for everyone involved
The way we imagine it, customers can choose from a range of mobile solutions with just one technology. In addition to P2P solutions, mobile payment processes will in future be increasingly enhanced with new functions, such as payments at kiosks, buying a ski pass, etc. The list is endless. They can be used quickly and easily in all countries, just like the EC card today. For service providers, there are advantages too, of course: with a single, pan-European standard, investments in added value services will finally pay off. These can be set up in an unhurried fashion; a range of business opportunities is opening up.
We’re also not that far away from this scenario either: some countries already have advanced solutions that are already integrated into the market. Here too, the example of Jiffy is taking hold in Italy. This solution is compatible with all banks in the SEPA zone and covers a considerable share of the market in Italy. In Germany, we are therefore thinking about implementing Jiffy as a solution for P2P mobile payments. The requirements are, as explained, already in place. And there is certainly no doubt about the fact that a single, consolidated and sophisticated P2P mobile payment market will be the only effective weapon against the arrival of new technological rivals, the TechPays, which do not distinguish between countries and instead differentiate only the operating systems on which they run, namely iOS, Android and Windows 8 Mobile. These solutions (such as Apple Pay) have not yet truly conquered the market: there’s time yet, however. But it is also time for action to be taken. The European standard will be important and helpful in this context for financial institutions.