The European cards environment and ISO 20022

The current cards environment in Europe is fragmented in terms of business solutions and technical standards. Both the goal of the European Payments Council (EPC) to realise a SEPA for Cards, as well as the influence of other market trends and developments, have highlighted this fragmentation. The current situation no longer meets the future business and security requirements of the European cards industry. This industry is asking for more efficiency, for lower costs, and for straight-through-processing (STP). A key element that may be triggering the whole evolution of card payments is regulation. Without that element, it is unclear whether the evolution of the market would have been so rapid. Greater standardisation and the search for better interoperability are certainly outcomes of changing regulations. There are a number of other factors that are driving the development of the cards industry. In the future, businesses are likely to require better efficiency, interoperability and optimised end-to-end processing. This underlines the growing need for further standardisation. Security and the evolution of security requirements in card payments will also be essential considerations. SEPA for Cards asks for more harmonised standards and interoperability in the European end-to-end card space. This should be achieved by replacing the various local standards with common, global, open standards. The Eurosystem has asked the EPC to provide clarity on all standards currently used or under development for end-to-end card transactions, and to recommend which will be used for SEPA for Cards. There are a number of initiatives in the different domains of the cards value chain such as EPASOrg and the Berlin Group that are giving direction to a possible outcome. There are some difficult questions that need to be answered. Is it possible to agree on one standard? What standard will fit into the new business and security requirements? Does the current ISO 8583 standard used in the Acquirer-to-Issuer space suffice, or should one change over to the more recent ISO 20022? Is a Europe-wide solution enough or should a more international standard be chosen given the globalisation of financial markets? And what are the challenges of adopting common industry standards through the whole value chain?