The European Payments System
The European payments market is undergoing significant change. The European Union, as part of its vision for a single European market, is committed to developing an open, highly competitive payments market — giving all European citizens, businesses and institutions easy access to the world's most efficient payment mechanisms. Moreover, the European Central Bank (ECB) is urging the industry to create a Single Euro Payments Area (SEPA) in which domestic payment infrastructures would be migrated to pan-European platforms. This would allow trade to take place more freely and create significant cost savings by displacing expensive payment mechanisms (such as cash and checks) with highly efficient electronic alternatives.
Creating SEPA will remove a patchwork of distinct domestic payment infrastructures across Europe – each with its own unique constitution, economic principles, processing systems and technical standards. It is also intended to help harmonize regulations, which currently vary from country to country and to create more cross-border competition.
An Evolving European Payments Card Market
The creation of SEPA is strongly supported by the European banking industry, which created the European Payments Council (EPC) to agree to a common response. As well as developing plans for new credit transfer and direct debit schemes, the EPC has adopted the SEPA Cards Framework, which sets out the requirements for compliant card products. It outlines how, by the end of 2010, no domestic-only products should remain in operation.
For the European payment cards sector, these changes will be significant. Banks will need to unravel national infrastructures, remove technical and operational barriers and, wherever they exist, eliminate the distinction between domestic and cross-border transactions. In many cases, they will need to decide how to adapt the existing bank-owned national processing organizations to comply with SEPA principles.
The challenges are not just technical. In Europe, the way that domestic payments operate is deeply ingrained into the respective national banking cultures. For example, in many European countries, the debit card lies at the heart of the bank-customer relationship. Furthermore, the vast majority of debit payments are extremely localized, taking place within a short distance of the cardholder’s bank branch. Given this strategic significance, banks are keen to maintain control over the way their own debit payments are managed, processed and accepted.
Visa Europe – Ready for Change
Visa is an ardent supporter of SEPA. It will pave the way for a larger, more competitive electronic payments market, which will handle many more transactions far more conveniently and with much greater efficiency. For Visa to serve this single market effectively, additional infrastructure and close collaboration among the European financial institutions is required. For this reason, and in full anticipation of this new internal market for payments, Visa Europe has structured itself to help its member banks deliver the SEPA goals most effectively. In July 2004, Visa Europe was established as a distinct, separately incorporated payments organization with a board of directors elected from representatives of European banks. As a membership association, Visa Europe can ensure a dedicated focus in delivering SEPA. In January 2007, all Visa Europe products became SEPA compliant, a full year ahead of the implementation deadline of the SEPA as defined by the EPC.
Visa Europe and Visa Inc.
Visa Europe is a membership association and an exclusive licensee of Visa Inc. trademarks and technology. Visa Europe is also a minority stockholder in Visa Inc.. Globally, Visa Inc. and Visa Europe use the same common platforms and technology so that cardholders can use their Visa cards anywhere throughout the world.
March 2008