By Matti Salakari, Senior Manager, EU Government Relations
Europe’s vibrant payments market is a key driver of the region’s competitiveness, fueling innovation, competition and digital commerce. With a diverse range of fast, efficient, and secure payment solutions, Europeans can seamlessly transact – whether between individuals or (small) businesses, locally or across borders.
Europe successfully capitalized on technological innovation and the digital revolution to establish an enabling regulatory framework for digital payments. This has spurred investment, accelerated the introduction of innovative payment solutions, and created a level playing field where all payment service providers (PSPs) can compete on fair and open terms.
Consumer protection measures strengthened user trust in digital payments, driving widespread adoption of new and diverse payment products and services across the European Union (EU). At PayPal, we have witnessed the rise of online commerce and understand that without customer trust, there would be no digital payments and no digital commerce.
As the EU outlines its vision for the second half of the decade, we see opportunities to strengthen a framework that fosters innovation, trust, and fair competition, while empowering consumers and businesses, especially small businesses. The EU Commission’s focus on reducing administrative burdens and assessing legislative impact on small businesses and new entrants is a positive step.
To unlock the full potential of digital payments in the EU, the enabling regulatory framework should furthermore:
- Ensure future-proof regulation and policy, fit for the digital age. Regulations should avoid mandating (even indirectly) specific technologies. Regulatory frameworks should allow for innovation and focus on technological neutral, risk- and outcomes-based objectives, allowing multiple solutions to compete and to foster innovation. Revising the framework for Strong Customer Authentication (SCA) is crucial to enable the deployment of state-of-the-art solutions that embrace the technologies of our era for superior security and usability.
- Apply the principle of “same activity, same risk, same regulatory outcome” at the center of policymaking. Competition must be fair and open, and proportionate, giving everyone – new entrants and incumbents – a level playing field. As we continue to observe the rise in consumer adoption of digital wallets across the EU, the EU should ensure regulatory parity between all digital wallet providers to provide consumers meaningful choice and comparable user experiences.
- Adapt the regulatory perimeter to embrace technological evolutions. The EU should consider how the increasing prominence of major tech platform providers in payments is impacting customer experiences and competition. Platforms that own both the mobile device and the operating system often provide competitive advantages to their proprietary payment service. Interoperability and parity of access (under FRAND terms) to device functionalities and data in the context of mobile payments, are critical, such that all PSPs including new market entrants can compete on equal footing. Access to NFC functionality on mobile devices provides opportunities for PSPs to bring about innovative services to customers. PayPal has launched an NFC-enabled payment option to customers across Germany, enabling them to pay in-store using PayPal.
- Design policy to enable choice. Transparency and education are key to helping customers understand both the benefits and risks of emerging technologies. As we see the growth of digital identity tools – whether government-issued or private – access should be fair and open to all, ensuring consumers have the freedom to choose where to store and use their digital identity. This approach allows businesses to offer secure and seamless experiences while safeguarding individual rights.
Digital payments are a crucial driver of European competitiveness, fueling economic growth and enhancing competition. By enabling seamless cross-border transactions, supporting innovation, and strengthening the digital economy, they position Europe, including its small businesses, at the forefront of global trade and commerce.
To fully harness the potential of digital payments, policymakers must continue to foster secure, interoperable, and consumer-friendly payment solutions. By embracing digital payments, Europe can maintain its leadership in the global economy, ensuring long-term prosperity and resilience in an increasingly digital world.