European Payments Initiative: The Super App Infrastructure

Across Europe — 44 countries, dozens of languages, myriad ways to pay — cross-border, cross-functional infrastructure could eventually give rise to a “super app.”

Martina Weimert, CEO of the EPI Interim Company, told Karen Webster that digital wallets, instant payments and buy now, pay later (BNPL) options would co-exist in a unified fashion across borders sooner rather than later.

The European Payments Initiative (EPI), as its name implies, exists to develop and deploy the infrastructure — in other words, the rails — to develop and deliver a pan-European payment solution.

Upon making the leap from concept to reality, that solution would give merchants and consumers a range of payment choices.  Those options would conceivably be tied together in a continuum where tie together digital wallets, peer-to-peer (P2P) payments, cards and an Instant Payment/SEPA Instant Credit Transfer (also known as SCT Inst) are all on offer, in much the same fashion that super apps have done elsewhere in the world.

See also: European Payments Initiative Looking To Topple US FinTechs

The creation of the EPI Interim Company itself stretches back just over a year when 16 European banks from five countries — a roster including Belgium, France, Germany, the Netherlands and Spain — joined together to implement the joint payment initiative across Euro and non-Euro markets. The ranks have roughly doubled, to 31 banks and two third-party acquirers.

As Weimert remarked about the EPI’s approach to merchants, “the idea is to say that they will have a kind of a toolkit, which will allow them to do accept all kinds of transactions in the retail space, and to introduce instant payments into this environment.”

Past is prologue in a way. Back in 2008, the EPI existed in another, earlier incarnation, known as the Pan European Payments System initiative. That earlier initiative had sought to create a network across all the region’s countries to pose a competitive alternative to the Visa and Mastercard networks. By 2011, the Monnet Project, which was the consortium of a few dozen banks, had sought to bring far-flung payment schemes together — creating a truly pan-European card system. Ultimately, disagreements over business models and interchange rates derailed the Monnet Project efforts.

Who Has Signed On

Weimert that this time around, the banks that have signed onto the EPI represent the largest banks in the EU, and that having the issuing and acquiring sides of payments — and, by extension, the merchants and the consumers — represents a different pan-European effort than what was seen before.

As Weimert noted, the digital wallet will be at the center of it all, cementing the continuum of cards and value-added services — including, in the future, digital identities.

As for the stakeholders in the payments ecosystem, the landscape has changed markedly, too, over that period of time.  Any number of players are jockeying to simplify, streamline and consolidate payment options, bringing them all under one app and/or ecosystem umbrella. FinTechs have joined the mix as the world moves inexorably to digital channels. These tech-savvy upstarts allow merchants to accept multiple payment options, including wallets and domestic card schemes, via a single application programming interface (API).

Weimert said that EPI has been cognizant that there are already myriad solutions across the various countries. Individuals have developed their own payments behaviors, with different apps to conduct payments on their smartphones and, at times, several cards in their wallets. The merchants themselves — large, small or mid-sized — yearn for a single solution that integrates all of the payment modalities their end customers want. It’s cumbersome for these companies to integrate separately into each market, especially when entering new countries.

Larger firms and U.S. merchants targeting Europe particularly want direct integration, Weimert said, despite having those solutions available to them via payment orchestrators. EPI also strives to migrate volumes from domestic schemes that consumers use to make payments online and offline by “substituting, little by little, what the domestic schemes were offering.”

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Weimert believes that will further spur payments innovation by freeing up more capability for innovation for new payment options. Those options can include buy now, pay later (BNPL), as EPI is open to European issuers and acquirers — and will eventually be available to a range of providers.

Near-term initiatives containing the solution will focus on currency conversion (specifically, the movement from cash to digital), where the first market for that feature will be Poland. Weimert told Webster that eastern Europe in general “remains a very important market for us.”

“If in the future, their challenger banks and digital banks want to join the initiative, there will be no obstacle for them to do so,” she noted.

In terms of a natural progression, said Weimert, the initial transactions would be smaller P2P payments among family and friends before mushrooming outward into other use cases.

“We see that the starting points and the situations of various European countries are quite different,” Weimert explained.

Behind it, all will be two distinct business models.

“For cards, we are not going to change that and reinvent the wheel,” she said of the move to bring card volumes into EPI – though those cards, physical and digital, would be issued under the EPI imprimatur. Merchants will continue to pay (capped) interchange fees, while banks will still have revenue streams from those fees.

EPI is also developing a different business model for instant payments, complete with a digital wallet tied to its brand, with room to add other features as banks and merchants see fit. Against that backdrop, merchants will offer new options to their end customers in a fluid manner. Weimert noted that BNPL could be offered to the customer at the point of sale (POS) without needing additional data or requiring the individual to move between different apps.

EPI Interim, as its name implies, will transition into a holding company, which will then (with investments and support from its member enterprises) launch its solution into the European market.

As Weimert told Webster, “We are absolutely convinced that there is a great opportunity and that there could be a lot of value for the consumers, merchants and marketplaces in Europe to come together.”

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