The European Union on Wednesday proposed injecting more competition into the payments sector, giving legal backing to a digital euro, and preserving the role of cash as fewer people use coins and notes.
The package of European Commission reforms, which update decade-old rules, seek to prise open a payments market long dominated by banks and U.S. duo Visa and Mastercard that are now being challenged by ‘fintechs’ offering rival services.
“In practice, this proposal will lead to more innovative financial products and services for users and it will stimulate competition in the financial sector,” the Commission said in a statement.
EU states and the European Parliament have the final say on the package, with some changes likely.
The reforms aim to make it harder for banks to stop fintechs from opening an account with them, and give fintechs access to payments infrastructure in the same way as banks.
“We are going to clearly identify the obstacles that the fintechs should never have been encountering,” an EU official said.
Electronic payments in the EU has grown from 184.2 trillion euros ($201.7 trillion) in 2017 to 240 trillion euros in 2021, accelerated by COVID-19.
Protections on data would be strengthened to encourage consumers to use rival services, with redress for unauthorised transactions such as “spoofing” or fraudsters pretending to be a customer’s bank.
The legal basis for banks and other payment firms to share information without falling foul of EU data protection rules is also being made clearer to reinforce the sector’s collective capacity to tackle scams, the EU official said.
The European Central Bank is due in October to decide whether to push ahead with a digital euro. The rules proposed on Wednesday would make it legal tender, meaning it would have to be accepted as a form of payment.
As more consumers switch to contactless forms of payments, Wednesday’s package also proposes to formally make euro notes and coins legal tender in a bid to avoid people without bank accounts or having difficulty making electronic payments being excluded.
