The European Central Bank has welcomed an initiative by some of Europe’s top banks to explore the development of a rival payment system to challenge the dominance of Visa and Mastercard and the threat from Chinese and US Big Tech firms
Backed by twenty French and German banks, the The Pan European Payment System Initiative (Pepsi) would seeks handle all forms of cashless transactions.
The ECB has long-floated the idea of a home-grown cross-border scheme capable of taking on the big brands, but so far without success.
In a speech to a central bank summit in Brussels, ECB board member Benoît Cœuré, says: “The Eurosystem welcomes the strategic initiative of a number of major European banks to create a true pan-European retail payment solution that has the potential to meet the vision of our strategy. The proposed solution would be based on the Sepa credit transfer instant (SCT Inst) scheme, which is in our view the correct approach as it is future-oriented. And it could capitalise from day one on existing powerful and sophisticated infrastructures, such as the Eurosystem’s TIPS.”
Cœuré calls on the banks backing the scheme to develop a clear roadmap “so that we can see tangible actions emerge soon”.
He also hinted at public policy initiatives to help such private sector solutions along, for example by imposing legislation obliging payment service providers to adopt instant payments within a certain period if a critical mass has not been reached by, say, the end of 2020.
“For its part, the Eurosystem stands ready to provide additional technical assistance where useful and required,” Cœuré adds. “For example, we will analyse how we could support the search for solutions that ensure that SCT Inst-compliant clearing mechanisms can be fully integrated. Current private solutions for the clearing of instant payments still have not addressed interoperability issues in a satisfactory manner. This requires further analysis and action.”
He also suggests that central banks should step up their research into the development of digital currencies as demand cash for tails off.
“A central bank digital currency could ensure that citizens remain able to use central bank money even if cash is eventually no longer used,” he says. “A digital currency of this sort could take a variety of forms, the benefits and costs of which the ECB and other central banks are currently investigating, being mindful of their broader consequences on financial intermediation.”