Turkeys voting for Christmas? How self-regulation makes the European payments market more competitive

This paper analyses whether it can be left to self-regulation to realise a competitive European market for payment services. Promoting competition is at the heart of the single euro payment area, but in a network industry such as payments, competitors need to collaborate and agree on basic conditions in order to be able to produce utility for their clients. If the European Payment Council (EPC) programme is consistently implemented throughout Europe, it will solve a number of concrete competition issues by improving the market structure considerably, while maintaining collaborative characteristics that are essential for efficiency. Specifically, the development of schemes and the separation of schemes from processing improve the competitive structure of the payment market. Enforcing this requires consistent support from all relevant authorities. Competition authorities, in particular, may play an important role in ensuring a consistent implementation of unbundling in all national markets. As things stand, the EPC programme also has some additional limitations, in terms of its mandate, which limits its work to the interbank sphere. There is a clear case to be made for expanding the scope of the scheme to a number of elements in the customer-to-bank sphere, particularly regarding security aspects. This also means that scheme governance cannot be exclusively in the hands of banks. Secondly, in markets where there is competition between schemes, ie the cards market, the ultimate impact of EPC work remains unclear. Particular issues require further attention in this market, eg multilateral interchange fees (MIF) and innovation.