The digital finance package proposed by the European Commission is aimed at ensuring that the financial services remain competitive in the digital age. It leads and propels the financial industry to a new era of financial services and supervision. This package aims at elaborating a comprehensive and harmonised framework, in order to boost Europe’s competitiveness and innovation in the financial sector while ensuring high level consumer protection and financial stability as well as the respect of the EU’s high standards on privacy and data protection.
Cashless payments are becoming more common. COVID-19 has changed the way consumers look at commerce and payment options. Businesses are adapting to make payment transactions fast and safe for both customers and associates. Application developers need to protect business continuity and align to evolving customer payment expectations.
- The total number of non-cash payments in the euro area increased by 8.1% to 98.0 billion in 2019 compared with the previous year, with a total value of €162.1 trillion.
- Card payments accounted for 48% of the total number of non-cash payments in the euro area.
- The number of payment cards issued increased by 5.5% to 572 million in 2019, representing around 1.7 payment cards per euro area inhabitant.
- Around 45 billion transactions were processed by retail payment systems in the euro area worth €35.0 trillion.
The Retail Payment Strategy
Payments are the main source of injection and generation in an economy. Payment methods are evolving in par with the provisional re-shaping within the financial services. It is evident that in the past years, even though there has been consistent innovation in terms of how payments can be made (e.g. the emergence of crypto assets), payment innovations were more focused on improving user interfaces and front end solutions. i.e. keeping the same procedures, but integrating an application to facilitate cumbersome procedures, including paperwork.
The Commission’s goal is to make retail payments more convenient, secure, and cost-effective.
The EU’s Payments Services Directive 2 established requirements to protect the security and efficiency of payments. Payments can now be made under certain circumstances within seconds, thanks to immediate payment technology. Banks are no longer the only businesses that provide payment services; “FinTechs” and huge internet platforms are becoming significant.
The Commission recently presented a strategy for developing the EU’s payments market so that it can fully enjoy the fruits of innovation and digitalization. This plan intends to make immediate payments and EU-wide payment solutions more accessible and affordable to European individuals and enterprises. Simultaneously, consumer protection and secure payment options remain at the heart of this strategy.
The Commission’s goal is to make retail payments more convenient, secure, and cost-effective, particularly in cross-border circumstances. This will boost economic activity by decreasing payment delays and expenses for companies.
Why is a digital payment strategy needed?
The digital revolution has enabled more firms to engage in eCommerce, which is envisaged to generate over €2.1 billion in total sales by 2020. According to the NSO, Malta’s eCommerce sales are 5% greater than the EU-27 average, and eCommerce sales have continuously expanded year after year.
This, combined with the emergence of a global pandemic, has increased the necessity for firms to trade online, increasing demand for online payment gateway services.
- A uniform rule across Europe is needed to improve the single digital market
- It helps in increasing and gaining consumers trust through suggested EU guidelines and/or recommendations
- Being able to reap the full potential of the SEPA (Single European Payments Area)
- Improving the acceptance of digital payments across all industries at all levels.
- Ensuring a high level of security for retail payments within the EU.
- Allowing interoperable payment systems and infrastructures
- Allowing more accessibility
- Easing the procedure in making international payments
This article is part of the FinTalk Podcast Series by Finance Malta and Tech.mt’s CEO, Dana Farrugia.
Posts in Series:
- The Digital Transformation in the Financial Industry
- The priority areas of the Digital Finance Strategy by the EU Commission
- A step forward in regulating crypto assets
- Addressing the mitigation of ICT-risks within the financial sector in relation to the EC proposal
- The rise of Digital Payment Methods