According to officials of the finance industry, by 2020, there can be in place a an instant payments system shared by all banks in the euro zone. This would be driven by greater competition being faced by banks from services being offered by companies such as Facebook and other tech companies.

Since 2017, it has been possible to implement real-time payments in the 19-country currency bloc. However the scheme that makes the transactions possible has so far been joined by only about half of the banks in the euro zone. The system of transaction is also primarily used for making domestic payments.

That scheme could however now get some air and speed because of the increasing competition from new entrants such as Facebook, which just last week announced the launching of its own cryptocurrency called Libra and its plans to make possible seamless payments and transactions for its users globally.

“The clock is ticking,” said Etienne Goosse, director general of the European Payments Council (EPC).

The EPC gets large European banks together and the includes names such as Spain’s Santander, Deutsche Bank and France’s Societe Generale.

Services offered by big tech firms would continue to provide new competition to banks irrespective of whether Facebook’s plans of moving into the payments segment are successful or not and hence banks need to take immediate action to counter such threat, Goosse said.

In contrast to the fragmented European banking industry, the advantage for large tech firms is that their operations are global in nature, he said. “They come with a global solution, under a global brand offering many things that the consumers seem to find wonderful,” Goosse said when asked about the impact of Facebook’s plans for crypto currency Libra.

“So we have no time.”

Goosse said that about 60 per cent of European banks and the payment services providers in the euro zone have so far adopted the EPC standard for instant payments. He added that by the end of 2020, it would expand to include to all banks in the bloc.

If there is no complete coverage, there can be payment and transfer failures in case of transactions involving banks that are outside of the system, which could be a problem for some bank customers. Such hiccups would reduce confidence and trust in the system according to one EPC official.

Transactions can between individuals and businesses can be completed within a few seconds with the help of instant payments. The completion period of a transaction is at least one day in the case of traditional transfers.

According to reports quoting other officials from the industry, 2020 is a credible target to complete the system expansion to all block banks. But the entire euro zone needs to be covered by the existing clearing and settlement mechanisms for the system to work across borders. These mechanisms make sure money is correctly transferred between parties.

(Adapted from Reuters.com)

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