A new report by card industry body Payments Europe claims Europeans would welcome government intervention to mandate electronic payment.
The report also says that, while instant, or account-to-account, payments are gaining ground fast, there is real disquiet from merchants about payment completion and transparency when it comes to faster/instant payments.
In some areas, the report makes claims that deserve to be challenged – such as merchant satisfaction with cards as a method of payment, or the future of cash.
Governments should drive change
Noting that some two-thirds of consumers now actively seek to pay without cash, The Evolution of European Payments suggests governments should be doing more to accelerate the shift away from cash, with markets such as Poland having had success in a government-backed programme to encourage acceptance of non-cash payments.
Poland’s state campaign to reduce cash led to 280,000 merchants adopting 400,000 ePOS terminals in recent years.
The report’s authors claim consumer satisfaction with payments choice is lowest in Germany (43%) because of the country’s long-held aversion to anything other than cash payment.
While there’s some credit to this view, Payments Europe seem to be ignoring recent legislative activity in some of Europe’s most advanced markets, such as Sweden and Norway, mandating the use of cash for elderly and vulnerable populations.
It’s important to remember that, even in the most advanced markets, between two and five percent of populations remain either unbanked or underbanked.
“In claiming supremacy for e-payments, Payments Europe are ignoring recent legislation mandating cash availability in the Nordics”
Are merchants really that happy with cards?
Payments Europe say that 70% of merchants don’t want to use cash owing to the handling costs and hygiene concerns of consumers.
They also report that 82% of merchants surveyed prefer cards over all other payments methods because of the transaction security cards offer, while (they say) 94% of merchants believe the cost of card payments represents a good deal overall.
Again, this flies in face of data from numerous surveys which note merchant concerns regarding the inflexibility and high cost of interchange rates.
Indeed, one might also consider the long history of lawsuits brought against Mastercard, Visa and other players regarding interchange as evidence that all is far from well in the relationship between merchants and card schemes.
Alt-pays rising fast: trouble ahead…
This study’s views on so-called “alt pays” are more credible and, arguably, ought to be of more concern to established card industry players.
Payments Europe note that instant payments are gaining ground in the market, with 30% of most age groups other than “baby boomers” comfortable with instant payment from their bank accounts, and a further 20% comfortable with instant payments by app.
While this report claims that less than half of merchants accept instant payments today, it predicts an aggressive increase in the acceptance of real-time payments such that more than two-thirds of merchants could accept instant payments by the end of 2022.
These figures are consistent with data seen elsewhere in the market, with payments integrator Plaid saying its payments initiation service grew sixfold in 2021.
While Payments Europe are right to focus on the need to reduce fraud risk and ensure full transparency in “alt pays”, experience suggests the card business is not immune to either of these issues, whether through rising fraud when using cards in the digital channel, or less-than-optimal transparency when it comes to merchant pricing.
Many account to account (A2A) systems and other real-time payments rails rely on the KYC systems of their banking partners, making them arguably equally secure or more so than merchant portals protected by passwords, one-time codes and the like.
PCM has long argued that cards have a future, but that future must include better security and expanded functionality – such as the ability to combine loyalty, debit, credit and BNPL functions on one piece of (recycled) plastic.
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