EU Commission to Initiate an Improved pan-European Instant Payment System to Compete with US
In a bid to shrink up American players’ dominance in the continent, Europe is set to establish an improved, instant payment system. This is according to the European Commission vice president Valdis Dombrovskis, who spoke at a conference yesterday (Tuesday, November 26, 2019).
As Reuters earlier reported, the official said that his team intends to initiate the Pan-European system by the end of 2021. Valdis said,
“By that time, everyone in the EU, people and companies, should be able to carry out domestic and cross-border payment transactions in all payment situations. EU banks must become fully available for providing and receiving instant payments across the EU.”
Target Instant Payment Settlement (TIPS)
While Europe already has an instant payment system known as TIPS, the European banks have been slow to join it, making its impact insignificant. Benoit Coeure is European Bank board member. Speaking at the same conference, he said Europe has to overcome its dependence on global payment providers such as MasterCard, Visa, Amazon, and PayPal, all of which are based in the U.S.
Coeure underscored that more than two-thirds of cashless payments in Europe utilize the international cards, as their competitors in Europe focus on domestic or regional market. Coeure said,
“Europe is at risk of losing its economic edge. Country-specific solutions lack necessary size and scale, and national fragmentation has paralyzed competition and stifled innovation on the pan-European level.”
Besides, Europe has been checking other options, including a cryptocurrency to counter private projects such as the Facebook-allied Libra. The EU is set to release the progress of the report on this development in the coming months.
Exploring Other Options
In a recent announcement, the U.S. Federal Reserve Bank revealed its intention to create a new “round-the-clock real-time” payment and settlement system, which would be launched in either 2023 or 2024. It will deliver instant payments, rivaling that of the private sector.
Coeure added that depending on non-European payment solutions has its share of challenges, as the EU bloc has no authority over them. Besides, the EU has limited oversight powers. He noted that new digital currency projects that are coming up to fill the void, including “stablecoins” could also be risky because they are not tested, and therefore create legal uncertainty.