Mersch made his comments while addressing a Bank of France Conference in Paris on 18th January, in a speech titled “Card payments in Europe – latest trends and challenges”. Discussing the emergence of innovative payment solutions, including distributed ledger technologies, the banker predicted they could “impact payment behaviour and the usage of cards and other traditional payment instruments in the years to come”.
Innovative card-based solutions have “the potential to further boost card usage by replacing cash payments” he said, while warning: “The card industry will be challenged by strong competition from innovative payment solutions based on payment instruments other than cards.”
Mersch cited instant payments as one of the challenges for card providers, explaining that the Euro Retail Payments Board, set up by the ECB, has decided that the European Payments Council should develop an instant payment scheme for euro payments based on the SEPA credit transfer system. Elaborating on distributed ledger technologies, he predicted that they could potentially have a “profound impact on the whole financial ‘ecosystem’”, disrupting both the use of ‘traditional’ payment instruments and services and the payments processing industry.
More choice for consumers and businesses is beneficial, he said, provided new payment solutions offered are secure and efficient and that all providers “play by the same rules”. Still, card transactions still have “huge” growth potential in the EU, according to the ECB board member, so long as an instant payments system is realised and a “harmonised, competitive and innovative European card payments area” is achieved via “standardisation, interoperability and appropriate security measures”.
He warned, though, that innovative payment solutions will pose a challenge to the cards industry. Competition will come from instant payments based on the SEPA credit transfer, from payment initiation services in the e-commerce sector, and from the adoption of distributed ledger technologies. Mersch concluded:
“This competition is welcome, provided the solutions offered in the market are secure and efficient and service providers play by the same rules. I am confident that the cards industry will find the right responses to these challenges – and to the benefit of users.”
BIIA Editorial Comment: If blockchain alternatives provide secure money transactions and companies like Amazon and Alibaba provide credit to their clients free of charge, who needs credit cards. That will lead to less credit information being shared with credit bureaus and ultimately less of their data will be used. Somebody described this possibility as the ‘Death Knell of Credit Bureaus’ (see BIIA Newsletter January II – 2016 Issue).