Introduction
Dramatic changes are happening in the payments landscape all across the globe. With the advent of new technologies and payment methods, and the changing demands and expectations of customers, banks must prepare themselves for what is seen by many as an unprecedented global renewal of the payment market infrastructure. Nowhere is this more the case than in Europe, where far-reaching infrastructure renewal and regulatory intervention are prompting a generational step-change.
European banks find themselves among some of the first movers in the world as regulators push hard to ensure a future proof and robust payments framework for its citizens. Regulatory drivers are putting Europe at the cutting edge of this payments transformation with three main areas forming the bedrock of this change. First, the TARGET2 and T2S consolidation project will see the introduction of a new Real Time Gross Settlement (RTGS) to satisfy developments in technology, regulatory requirements and evolving consumer demands. Secondly both high value payment services (TARGET2 and EURO1) will migrate to the new ISO 20022 standard.
Finally and possibly most importantly we continue to see the rise and adoption of instant payments in the region. Bringing an instant, always on aspect to payments. Something consumers and corporates alike have been asking for, for a long time.
These changes will bear a significant impact on the state of the payments landscape in both the near and long term across the region. Building pan-European instant payments infrastructure which is accessible to all financial institutions holds wide-ranging benefits. These include ensuring existing technologies will be streamlined, players enthusiastic to maximize the potential of these frameworks won’t be hindered from innovating due to outdated legacy systems and vitally, regardless of whether it’s an institution or everyday consumer, the end user will have faster, more convenient and secure methods to transact.
As well as the regulatory drivers of change we see pushing transformation in Europe banks are also feeling the impact from other areas. Digitization is driving expectations for fast, frictionless and borderless payments that are embedded in transaction chains and eco-systems, whether for retail purchases or business transactions. This is a challenging environment for financial institutions (FIs) that have invested in branded payment channels and use clearing mechanisms which are not yet instant.
In this paper we’ll explore the changes happening in Europe right now, as well as how banks can prepare with a forward facing approach to modernizing their payment systems to manage this transition safely, efficiently and successfully.
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