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More recently, the Eurosystem has also introduced TARGET Instant Payment Settlement, or TIPS. This service, which was launched a year ago, enables payment service providers to transfer funds to their customers in real time, around the clock, every single day of the year. And it settles the payments in central bank money.
But progress at the back-end has not translated into similar progress at the front-end, which remains fragmented, with no European solution emerging for point-of-sale and online payments.
National providers in particular have not been able, or willing, to act in a pan-European manner. 20 years after the introduction of the single currency, we still do not have a European card scheme. Ten European countries currently have national card schemes that do not accept cards from other EU countries.
This has led to a notable rise in the use of non-European cards for non-cash payments. At the end of 2016, the share of transactions made with international card schemes was a little more than two-thirds. It is unfortunate that past harmonisation initiatives have failed to explore the significant economies of scale that the Single Market offers.
In addition, the current situation has attracted new initiatives that aim to overcome shortcomings in cross-border retail payments by building a new separate payments ecosystem.
These initiatives highlight the rapidly rising consumer demand for payment services that work across borders and that are also faster, cheaper and easier to use. Among younger people in particular, there is a willingness and curiosity to use new technologies and try new providers.
Relying exclusively on non-European and new ecosystems presents two risks, however.
The first relates to the untested nature of some initiatives. Global stablecoin arrangements, for example, raise potential risks across a broad range of policy domains, such as legal certainty, investor protection, financial stability and compliance with anti-money laundering requirements. Public authorities have made clear that the bar will be set very high for these stablecoin initiatives to be allowed to operate.
See G7 Working Group on Stablecoins (2019), Investigating the impact of global stablecoins, October.
The second risk relates to the autonomy and resilience of European payments systems.
Dependence on non-European global players creates a risk that the European payments market will not be fit to support Single Market and single currency, making it more susceptible to external disruption such as cyber threats, and that service providers with global market power will not necessarily act in the best interest of European stakeholders.
Global payments markets are undergoing a transformation. Rapid technological progress, regulatory reforms and rising cross-industry initiatives, in particular by large global digital firms, have led to unprecedented dynamics and are putting established banks and payment service providers under considerable pressure.