ESBG Working Paper: SEPA or payments innovation - a policy and business dilemma

31 December 2011

This working paper reports on what policy-makers and regulators have to say about payments innovation, what models academics have formulated in this respect, the conclusions they draw, and what aspirations are expressed and solutions introduced by the demand and supply sides of the market.

This Working Paper first compares public policies and related action in the European Union, the United States, Australia and Canada. It asks why policy-makers and/or legislators are concerned about payments innovation, how they define payments innovation, and how they see their role in making payments innovation happen. The Working Paper assesses the effectiveness of the different approaches against the relative efficiency achieved by each payment system (as measured in terms of non-cash payment transactions per capita).

The Working Paper then reviews recent academic research on payments innovation. This includes the definition of investment strategies for payments innovation, the segmentation of innovation into technology innovation and service innovation, the drivers for providers to innovate, the three conditions required for market adoption of new payment instruments, and the five possible cooperation models between market participants. The Working Paper then assesses the policy pursued by European policy-makers and regulators against the conclusions from academic research.

Finally, this Working Paper reviews a range of aspirations expressed in recent surveys and consultations by the demand and supply sides of the market. It also scans recent news releases for evidence of where the "centres" for payment innovation are, and how they are moving. The Working Paper concludes with an analysis of the various market drivers, and an assessment of the capability of the European policy-makers and regulators in making them work for both the market integration and innovation objectives.

Full working paper

© ESBG