Demand in Europe for payment instruments that can be used anywhere across the continent is on the rise. More than 8% of card payments in Europe are now cross-border transactions. “It's high time, if you ask me, for Europe to forge a solution of its own that builds upon the strength and efficiency of the national systems,” Mr Balz explained at the recent SAFE Policy Lecture at Goethe University in Frankfurt am Main. This, he announced, would invigorate competition overall and also bolster European payment instruments and their providers. So far, cooperative agreements with the US credit card providers Visa and Mastercard have been the main reason why customers have been able to use their girocard for payments in other European countries.

A brand for European payments

Mr Balz explained that, for the European solution he has in mind to become a reality, credit institutions would first need to ready their internal systems for processing real-time (instant) payments. “Here, too, the Bundesbank welcomes the consideration being given to upgrading existing means of payment such as the girocard and making them ‘fit for Europe’ by, for instance, enabling cross-border settlement through the new instant payment channels,” he noted. He could also well imagine rolling out “a kind of brand for European payments”. This, he reported, “would open up opportunities to stake out a stronger position in the digital payments market”.

Real-time payments – reimagining the world

Commenting on how real-time payments have evolved in the world of euro payments, Mr Balz called on the banking industry to speed up their processes. He urged “traditional retail banks, especially, to […] reimagine the world and challenge their in-house business processes with a view to deconstructing them to make room for a proposition that reaches beyond their existing boundaries”. While European card systems may have launched a new initiative to settle cross-border card payments via instant payment channels harmonised across the EU, an integrated European market for card payments is still some way off, despite the benefits that SEPA has delivered.

Make instant payments an integral part of payments operations

Alongside the national clearing systems and the European solution used for settling instant payments in euro since the end of 2017, the Eurosystem’s Target Instant Payment Settlement System (TIPS) has also been up and running since last November. TIPS, Mr Balz said, is there to ensure pan-European reachability for every institution and to help establish instant payments as the standard settlement channel in the world of European payments. “Our goal is to encourage, as quickly as possible, as many entities as we can to sign up for this initiative and thus to establish instant payments as a Europe-wide core scheme for the digitalisation of payments,” he remarked, adding that while there is still some way to go, “the foundation for instant payments has been laid”.

Payments of the future

Mr Balz is in no doubt that instant payments can help German and European credit institutions re-establish a closer relationship with their customer base. “They could be the anchor product for pan-European payment services that are linked up to the retail or business customer’s current account,” he claimed – but only if every single European institution switches to real-time payment processing in the near future. “In the digital age, products will only gain a foothold in the market if they are very simple and offer customers convenience,” Mr Balz argued. And this will depend on the national systems being available across national borders, and there being easy-to-use access channels, such as apps, to encourage customers to embrace instant payments.