The European Union (EU) has long championed digital payments as a safer, faster and more cost-effective alternative for consumers and businesses.
While the value of retail digital payments in the EU surged to over €1 trillion in 2023 – doubling since 2017 – a new report from the European Court of Auditors (ECA) highlights gaps in the bloc’s approach, particularly concerning price interventions and Open Banking practices.
Lack of Periodic Reviews
The EU has implemented various price interventions in the card market, including interchange fee caps, bans on surcharges for card payments and price parity for cross-border euro transactions.
These measures aim to curb unfair competition and benefit consumers, yet the ECA warns of potential inefficiencies.
One major concern is the absence of requirements for the European Commission to periodically review these interventions.
As ECA Member Ildikó Gáll-Pelcz noted, “For some of the interventions linked to card payments, the European Commission could not demonstrate that the positive effects for consumers clearly outweigh the negative ones.”
Without systematic evaluations, these policies risk distorting market dynamics, leading to higher costs for payment service providers and potentially undermining their benefits for consumers and merchants.
For example, EU consumers paid an estimated €5 billion to €6 billion in card fees in 2023, despite these interventions.
Open Banking: Barriers to Quality and Innovation
The EU’s Open Banking framework has also come under scrutiny.
While it mandates free access to user account data for third-party providers, the ECA warns this could discourage account data holders from delivering high-quality services.
Additionally, the lack of standardised application programming interfaces (APIs) creates barriers for third-party providers, hindering innovation and interoperability across borders.
Open Banking remains fragmented (but not like the US market), with implementation and monitoring largely confined to national authorities.
This lack of reliable, consolidated data makes it challenging to assess the effectiveness of Open Banking initiatives across the EU.
Cross-Border Challenges Persist
Despite the Single Euro Payments Area (SEPA) Regulation prohibiting discrimination based on payment account location, consumers still face issues with declined payments due to foreign account numbers.
Regulatory loopholes and inconsistent enforcement by national authorities exacerbate this problem, undermining the principles of a unified payments market.
The EU has taken steps to address these issues, including the launch of Payment Services Directive 3 (PSD3) and the Payment Services Regulation (PSR) in 2023.
These legislative proposals aim to refine the payments framework, enhance competition and improve transparency.
Additionally, the European Commission’s ongoing market survey into card payments aims to identify and mitigate anti-competitive practices.
As digital payments continue to evolve, the EU’s ability to strike a balance between innovation, cost efficiency and consumer protection will be critical to fostering a resilient and inclusive financial ecosystem.
The ECA’s findings underline the need for robust monitoring, data-driven decision-making and greater standardisation – alongside continuing monitoring of implemented rules, to ensure the long-term success of the EU’s digital payments strategy.
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