The digital euro is intended to strengthen Europe’s payments landscape by supporting innovation, competition and user choice. Against this background, we, as representatives of the payment-sector, are extremely concerned that the negotiations in the European Parliament on the compensation model for the digital euro are going in the wrong direction and would, as drafted, result in the exclusion of much of the innovative non-bank payment sector from the project. We cannot believe that this is the intention of the EU legislators.
We deeply appreciate that the European Parliament compromise text includes the possibility of citizens holding more than one digital euro account. This should in theory lead to greater competition and innovation.
Nonetheless, the current compromise text also stipulates that these wallets can only be funded or defunded based on a contractual relationship and a fee imposed by the bank holding the customer’s funds. The idea of multiple wallets therefore remains highly theoretical. The proposal would require over 6000 banks and 600 non-bank payment providers to enter into a myriad of bilateral negotiations with the banks having no incentive to open up customers’ accounts to their competition. Furthermore, open banking payment initiation services (PIS) would in practice be excluded. In effect, this discrimination against the non-bank payment industry would at best severely slow down the roll out of the digital euro and at worst exclude an entire sector from making the digital euro a success.
The proposal stands in stark contrast to the Payment Services Directive (PSD). Here the banks have to grant access, free of charge, purely based on the consent of the customer. We believe this is the right approach, has been well established in European law and recognises that the customer and not the bank should decide how an individual allocates and uses their money.
To give a bit more context. The EU has traditionally been at the forefront of developing and supporting a vibrant and highly competitive payment sector. The Payment Services and E-Money Directives of the early 2000s led to the creation of more than 600 new providers across Europe supporting card payments, account-based payments, e-money and many other new solutions. In fact, many of Europe’s successful FinTech companies operate in the payment space or had their origin in this sector. It is an industry where Europe is demonstrating clear global leadership.
As drafted, the rules on the digital euro will not allow us to replicate this success in the ecosystem of the digital euro. As a result, the digital euro will not reach its potential of reaching wide use and acceptance among citizens and companies. The innovation is likely to come from outside the digital euro, not least through the use of stablecoins. This seems at odds with the legitimate aspiration of EU legislators to strengthen the European payment sector and advance the international role of the euro.
We therefore call on EU legislators to make the automatic funding and defunding from digital euro accounts obligatory based purely on user consent, without requiring bilateral contractual arrangements with account servicing providers, and without additional charges for basic access. The framework should also allow for the use of payment initiation services (PIS). The Digital Euro Regulation should fully replicate the provisions of Articles 66 and 67 of the PSD2 (now PSR (Articles 37- 40 PSR)).
As the non-bank payment sector, we are excited about the digital euro and want to develop and provide services that align with merchants’ and citizens’ expectations and remain open to innovation, convenience and highest security standards.
About EFA:
The European FinTech Association (EFA) is a not-for-profit organization representing leading FinTech companies of all sizes from across the EU. It brings together a diverse group of 40+ FinTech providers ranging from payments, to lending, banking, robo-advice, investment as well as software-as-a-service for the finance sector, with a clear focus on enabling a single market for digital financial services. For more information, visit www.eufintechs.com
Find out more about:
EPIF – European Payment Institutions Federation (www.paymentinstitutions.eu)
ETPPA – European Third Party Providers Association (www.etppa.org)
EMA – Electronic Money Association (www.e-ma.org)