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Payments innovation

 In recent years, the euro retail payments market has increasingly offered innovative solutions for making payments. This development is expected to further accelerate in the coming years, due to the technological, social and economic changes associated with digitalization and given that the EU regulatory framework allows non-traditional service providers to enter the market for retail payment services. Furthermore, retail payments innovation and financial technology also have an impact on payment systems. Committed to promoting smooth and efficient operation of payment systems, the European Central Bank (ECB) and national central banks (NCBs) rely on ongoing research and analysis of developments in the area of payments in order to help create and maintain a harmonised regulatory framework that prevents fragmentation and ensures a level playing field across Europe for both end users and service providers.

Against this background, innovative payment solutions are a key factor in achieving a single and competitive market for retail payments in euro. Aiming to ensure that these solutions do not act as barriers to market entry or give rise to fragmentation in payment services offered across Europe, or even threaten the safety and integrity of payment systems, the Bank of Greece (BoG), as one of the Eurosystem NCBs, carries out research and analysis with a primary focus on the following areas:

 

 

 


Instant payments

Instant payments are defined as “electronic retail payment solutions available 24/7/365 and resulting in the immediate or close-to-immediate interbank clearing of the transaction and crediting of the payee’s account with confirmation to the payer (within seconds of payment initiation). This is irrespective of the underlying payment instrument used and of the underlying arrangements for clearing and settlement.” The Eurosystem, seeking to avoid fragmentation and achieve a single and competitive market for retail payments in euro, acts as a catalyst for instant payments by providing the necessary standards regarding security and efficiency. In this context, it has decided to develop a new service for the settlement of instant payments, the TARGET Instant Payment Settlement (TIPS), offering high level of reachability and, final and irrevocable settlement for instant payments in central bank money on a 24/7/365 basis.

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Mobile payments

The mobile payment applications developed by payment service providers, in cooperation with start-ups, both national and European, are either person-to-person (P2P) or consumer-to-business (C2B) transactions. These innovative mobile payments are typically based on traditional payment instruments (cards, credit transfer or direct debit), enabling smart phones to be used as payment-initiating devices, replacing e.g. plastic cards. Thus, mobile payments can be classified as proximity payments (contactless payments using, for example, near field communication technology (NFC)) and as remote payments (e-commerce). In addition, in mobile payments the payment data and the payment instruction are transmitted and/or confirmed via mobile communication and data transmission technology through a mobile device.

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Digital wallet solutions
Digital wallet services make it possible to combine different payment instruments in one single electronic wallet, and to make a payment very convenient, easy and secure by making just one click, one touch or one-tap in both point of sale proximity payments and e-commerce payment situations. Digital wallet holders can use cards and accounts for their payments just as they would use cards or cash to make payments out of a physical wallet. In particular, digital wallet solutions serve as storage (i) of secure information necessary to authenticate the user and (ii) of payment data necessary for initiating a payment transaction; and hence provide flexibility and safety.

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Payment initiation services

Payment initiation services are clearly defined in the Payment Services Directive (PSD2) as services “to initiate a payment order at the request of the payment service user in relation to a payment account held at another payment service provider”. These services are built on top of traditional payment schemes and provide, with the same degree of security, higher user convenience in managing their e-commerce payments, while ensuring that the online merchant receives the payment immediately. The recent inclusion of payment initiation services into the scope of EU and national regulation enhances transparency and security in the single market and creates a level playing field for all the relevant service providers across the European Economic Area (EEA).

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Digital currencies and distributed ledger technology applications

Digital currencies, and most notably cryptocurrencies, have been receiving growing attention from both public authorities and market participants. Most of them are based on distributed ledger technology (DLT), which makes them convenient and easy to use and provides enhanced privacy protection. On the other hand, the lack of an EU regulatory framework, their high price volatility and the increased risk of criminal use, fraud or money laundering, make them less attractive than fiat currencies as a medium of exchange. The ESCB, has a keen interest in the possibilities offered by DLT technology within the current financial ecosystem and in the prospect and implications of a potential central bank digital currency.

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Integration of electronic invoicing with retail payment systems

Electronic invoicing (also known as electronic invoice presentment and payment (EIPP)) can be defined as the delivery of an invoice, its payment, and its subsequent processing and storage, in a fully electronic format. Electronic invoices (e-invoices) offer significant advantages over traditional paper-based invoices, including higher speed, fewer errors, savings on printing costs and postage and, above all, full automation and integration of the process between the biller and the payer. In this light, the possibility of the integration of the e-invoicing functionality into the payment processes, both at the domestic and at EU-wide level, acts as an additional driving force towards a single retail payments market. Full automation in the invoice exchange and settlement process helps to improve market efficiency by saving substantial financial resources.

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Contact
Payment and Settlement Systems Department
Funds Transfers and Infrastructure Study Section
341 Mesogion Ave., 152 31 Chalandri

Yorgos Korfiatis                              Katerina Ioannou Siouta
+30 210 6799 781                         +30 210 6799 782
ykorfiatis@bankofgreece.gr             kioannou@bankofgreece.gr   
                                                  

Instant payments Payment initiation services Mobile payments Digital currencies and distributed ledger technology applications Digital wallet solutions Integration of electronic invoicing with retail payment systems Instant payments Payment initiation services Mobile payments Digital currencies and distributed ledger technology applications Digital wallet solutions Integration of electronic invoicing with retail payment systems

 
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