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  • Writer's pictureThe Pay Off The Blog

Chapeau to the Commission

You have to hand it to the European Commission. The von der Leyen Commission took office in December 2019, six months after Boris Johnson moved into Downing Street and 11 months ahead of the US election. During its first year in office the Commission had to deal with the final 12 months of the Trump administration and the seemingly endless rounds of the Brexit talks …. and that was on top of the political upheaval and social unrest that continues to spill across the continent; immigration and budget problems, testy relations with Russia, Turkey, Iran and China … And then of course there came Covid.

So chapeau to the Commission for cracking on with payments. Whatever you might want to fault the Commission for, it can't be a lack of enthusiasm for addressing payments and driving towards a single payments market. From the euro to SEPA and the first Payments Services Directive, to PSD2 and the IFR, the Commission does not stand by idly. In June last year its competition directorate opened a formal antitrust investigation into Apple's conduct in connection with Apple Pay, in July it championed the arrival of the European Payments Initiative (EPI), in September it committed to getting a digital ID underway, and in November it published a new Retail Payments Strategy. 2021 has thus far been no quieter; just last week the Commission set out its new ambitions for a stronger euro and (together with the ECB) marked a stake in the ground for a potential digital euro.

As the Commission knows well, payments are stubbornly national; stitching together the single euro payments area took time, effort and quite some sweat. What’s more, it’s not just that there are still nine EU currencies and 27-odd national payment preferences, legacy systems, banking authorities, national associations and more, but there’s a huge divide in digital readiness. The nimble north – Finland, Sweden, Denmark, and the Netherlands tops the rankings in all things digital – with world-leading rates of digital adoption (and cash abandonment). But there’s chunky middle ground dominated by countries such as Spain, France, and Germany, and an even heftier contingent lurking at the bottom, comprised of Poland, Italy, Romania, Greece and Bulgaria. According to the Commission’s own reckonings, digital skills in Greece, Bulgaria, Romania and Italy are less than half what they are in Finland. In 2019, 91% of internet users in the UK and 86% in Denmark shopped online, but less than 30% did so in Romania. That enormous spread is difficult to plan for, let alone to devise a digital payment instrument for.

Whatever you think of the euro’s blueprint or the regulatory small print, Europe has done a commendable job in forging the payments power of those disparate 27 countries. But it still finds itself regulating what comes in from abroad. Right now, Europe is squeezed between US and China in payments (as in much else). BigTech dominates payments in China and is fast getting into them in the US. And for all that Europe has some payments unicorns, it has nothing of the might of Visa or MasterCard, not to mention Apple, Facebook or Alipay. As French President Emmanuel Macron recently admitted the US has the GAFA, China the BATs … and Europe has GDPR.

And yet – or and thus – the Commission, together with the ECB, is forging ahead with its latest payments’ initiatives. The EPI, the euro CBDC and the effort to strengthen the role of the euro are proof that the Commission has not resigned itself to merely regulating what comes from abroad. It aims not just to get its own pieces on the payments chessboard, but to be a full participant in the payments race.

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