by Mathilde Bonneau, Government Relations
The European payments market is dynamic and competitive. Europeans enjoy a variety of payment methods available across the European Union that are both secure and fast. The benefits of the SEPA project, turning previously fragmented national markets into a single market for payments, cannot be understated. Neither can the positive impact of the PSD1 and PSD2 in creating a single rulebook for payments, making domestic and cross-border payments in the EU more efficient, secure, and transparent.
As policymakers consider the future of the payments market in the EU, PayPal believes that the single rulebook should embrace the technological payment innovation of today and tomorrow.
Customers: Leading Payment Innovation In Europe
Customers drive the EU market’s dynamism and competitiveness. The pandemic increased the use of digital and mobile payments, both online and in-store, changing the way that customers shop, buy, and spend. Accelerated technological development has made it possible to meet evolving customer needs, leading to new and more persified payments services, such as digital wallets and BNPL products.
Customers expect payments to be safe, secure, fast, and seamless. They also expect choice: the ability to choose a preferred payment method and experience. And more choice for customers leads to better experiences for merchants, ultimately promoting digital growth and enabling digital commerce.
A payment provider’s ability to provide safe and secure frictionless payment experiences, in any context and on any device, will therefore remain a key differentiator in the increasingly competitive European market. For this reason, it is crucial that legislation appropriately accounts for these two key trends: consumers’ growing expectations for better payment services, and the industry’s technological advances to deliver improvements in security.
Recommendations For Policymakers
A future-proof regulatory framework will enable payment providers to meet customer expectations of secure, fast and frictionless payments. PayPal recommends that policymakers consider the following as they design the payments framework of the future:
- The draft Payment Services Regulation’s (PSR) focus on more accessible, data-driven and innovative SCA solutions that can be performed using a single device, will be critical to make authentication services more innovative, inclusive, and competitive. Authentication journeys are essential to provide customers with a great payment experience. The regulation should embrace innovative technologies (such as Passkeys) that enable more convenient authentication experiences using device recognition technology, (behavioral) biometrics, and other data-driven methods that can deliver equally high levels of security.
- Apply the age-old adage “same activity, same risk, same regulatory outcome” at the center of regulatory design. The regulatory framework for digital wallet providers should consider the payment-related activity, the customer outcome, and the associated risks, rather than focusing on the entity, the specific product, or the technology behind it. We urge the EU to ensure regulatory parity between all digital wallets to provide consumers meaningful choice and comparable user experiences.
- As consumers embrace technological evolutions such as digital wallets, policymakers should consider how the increasing prominence of major tech platform providers in payment services is impacting customer experiences and competition in payments. Platforms that own both the mobile device and the operating system often provide competitive advantages to their proprietary payment service. Policymakers should foster interoperability and parity of access under FRAND terms, such that all digital wallets including new market entrants can compete on equal footing. This would foster more competition and drive innovative payment providers to continue investing in customer-focused solutions.
Embracing technological innovation to support digital commerce and trade
PayPal’s experience is that providing secure payment services is fundamental to build and maintain consumer trust. As we continue to accelerate cross-border, including intra-EU, commerce for SMEs and consumers, we will deliver secure experiences that are also convenient and seamless for customers in the European market. The EU should embrace the opportunities that technological innovation provides as they consider the future of the payments market, so that Europeans can fully participate in the digital economy.