Retail Payments and Digital Finance Strategy for the EU

Retail Payments and Digital Finance consultations: Mastercard overview

Introduction This paper summarises the key points from Mastercard’s responses to the European Commission’s consultations on retail payments and digital finance.

Headlines • The market should drive new payments initiatives, services and schemes across European markets. Consumers and merchants should be able to choose the most appropriate payment solution for them. • The market in PSD2 is competitive and functioning well – no further action at the EU level on PSD2 is needed. Instead, Commission efforts should focus on Open Finance. • Guidance or the development of new standards on digital identity at the EU level is needed to facilitate cross-border interoperability. • Data sharing will enable responsible innovation in Europe. This must be underpinned by a principles-based and flexible approach shaped by industry-wide engagement • Further action is needed at the EU level to provide regulatory clarity on cross-border payments, enabling alignment behind a clear set of rules.

Cross-cutting payment issues • Electronic payments are the foundation of the digital economy in Europe; they connect consumers, banks, merchants, governments, digital partners, businesses and other organisations across Europe and the world. • The EU is already a highly competitive marketplace that delivers efficient, secure and convenient payment solutions that meet consumer needs. • Recent EU regulation (such as PSD2 and PAD) has further helped to encourage competition and bring new entrants to market. • EU citizens benefit from access to international payment schemes that enable consumers, businesses, governments, and banks, as well as new digital platforms, to transact worldwide. • When promoting competition, the Commission should continue to enable regulatory certainty through the maintenance of a regulatory level-playing field.

Retail payments consultation

Instant Payments • Instant payments deliver significant benefits for consumers across Europe and complement existing payment solutions. • The market is proving effective in driving important new payments initiatives, services and schemes across European markets. • In general, the levels of fraud for instant payments are materially lower than for other forms of electronic payment. However, instant payments do enable fraudsters to transfer funds more rapidly from a victim. Fortunately, the technology to trace funds through account-to-account payment networks now exists.

Open Banking • PSD2 has been successful in opening up the payments industry to new entrants and kick-starting Open Banking. The financial sector in Europe has moved to develop new solutions and products in order to meet PSD2. • While there are a number of challenges under PSD2, the market is competitive and functioning well: no further action at the EU level on PSD2 is necessary.

• Some market consolidation is at hand but this shouldn’t be the cause of further action. • In terms of achieving the aims of PSD2, we note the importance of the new initiative underway on Open Finance. This should be the focus of efforts in this area.

Cross-border Payments • At present, there is a lack of regulatory clarity on the rules governing cross-border payments, specifically regarding KYC, anti-money laundering and implementation of FATF guidance. At present, there are ‘grey areas’ where actors require clarity before executing services. • Mastercard welcomes further action at the EU level to provide regulatory clarity, enabling alignment behind a clear set of rules.

Digital Identity • Digital identity and trust services play a significant and growing role in Europe’s economy and society. They stand to make consumers’ lives easier to manage. • Mastercard would like to see further guidance or the development of new standards at the EU level to facilitate cross-border interoperability. • There should not be barriers to use where digital identities meet payment authentication requirements. The review of eIDAS is an opportunity to further enhance the current regime and deliver a private sector interoperable digital identity solution. • It is important to note that identity is only one consideration; risk models are largely reliant on national data (e.g. credit scores) that are not harmonised.

Digital finance consultation

Data driven financial sector • Enabling and facilitating data sharing is one of the key cornerstones to allowing responsible innovation to flourish in Europe and beyond. • Any such framework requires a principles-based and flexible approach shaped through industry- wide engagement, whilst taking local market conditions into account. • Mastercard’s view is that a financial services customer who consents to a Third Party Provider (TPP) accessing their financial data could be offered tailored products and services as a result. Access should be provided under a clear framework of consent/agreement. • Mastercard views consumer control (i.e. information belonging to the individual who controls how said data is used and shared) as a core principle in building any data sharing eco-system.

Open Finance • Open Finance will increase access to products and widen consumer participation in the market. • These opportunities are just as good for businesses’ ability to innovate as they are for consumers to benefit from new products and services. • Mastercard supports action on Open Finance over further legislative activity on PSD2.

Data and AI • Mastercard believes that the future of data innovation must be human-centred, keeping individuals and their rights at the centre of product design and innovation processes. • This fundamental approach is critical in the development and application of ethical AI in the financial industry, where the use of AI can be particularly impactful in areas that directly impact individuals (e.g., solutions which fight fraud, provide better customer experience or drive financial inclusion, where underserved individuals may be provided with access to banking and credit).