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~ Wijnand Jongen ~

COLUMN

BUILDING A EUROPEAN PAYMENT MARKET THAT
BENEFITS MERCHANTS

hen we think of e-commerce, we picture need to use an intermediary like cards. As a result, A2A
slick websites, cardboard packaging, and options are often less expensive while providing an equivalent
Wdelivery trucks. But we all tend to over- level of service. Between 2023 and 2027, A2A payments in
look a key element to online commerce growth: pay- e-commerce are expected to grow at an annual rate of 14%
ments. In fact, trusted payment solutions are truly becoming an increasingly important competitor to card-based
the cornerstone of e-commerce, enabling businesses solutions. This diversification in the European payment mix
and consumers to sell and buy goods and services will help reduce businesses reliance on international card
online in a seamless and secure way. How consumers schemes and contribute to lower prices and e-commerce
choose to pay, along with the associated costs, have growth.
a significant impact on the overall profitability and
resilience of the sector. This is particularly impor- A trend supported by EU legislative development
tant for e-commerce businesses which are often European policymakers have recognised the importance
low-margin and facing strong global competition. of diversifying the payment mix and reducing the overall
To explore this topic, let’s delve into what is the reliance on international players. To that extent, they have
payment market like today, what trends and regula- been encouraging this trend through major regulations,
tory development have emerged in recent years, and such as the instant payment regulation or the regulation
what is still needed to build the European payment on the digital euro, that are likely to have a big impact on
market that benefits all merchants. e-commerce in the coming years. The new regulation on
instant payments will for instance oblige banks within the
Towards a more diversified European payment mix Eurozone to accept incoming instant payments for free as of
With the ongoing digitalisation of the economy, the January 2025. Instant payments are money transfers, based
European payment landscape has witnessed a strong on the A2A technology, that make funds available in the
development of digital payments. Despite a lot of innovation, merchant’s account within ten seconds, instead of the typical
digital payments are still highly dominated by card-based 2-3 days delay that transfers usually bear. This regulation
solutions and merchants heavily rely on international cards will create the perfect legislative basis for the development
schemes, like Visa and Mastercard, to process the majority of new and cost-effective payment solutions applicable to
of card-based transactions in Europe. Today, Visa and e-commerce. Moreover, the Payment Services Regulation 2
Mastercard represent 64% of all electronically initiated marking the EU’s increasing efforts to develop open banking,
transactions with cards issued in the euro area. However, the is currently being revised with the ambition to address
fees imposed by international cards scheme for the handling remaining barriers for alternative payment methods.
of those transaction have been escalading to an extent that
do not seem to be justified by either the level, or amount, Another interesting development for merchants in the
of transactions processed. Higher payment costs not only coming years will be the roll-out of the digital euro. As
burdens merchants, but also translates into higher prices for consumers increasingly pay digitally, the European Central
consumers, as merchants have little choice but to pass on part Bank has been investigating the feasibility of introducing a
of the increases that are unilaterally imposed on them. digital version of physical cash. It will be made available to
consumers to make everyday purchases, including online.
However, consumers are changing their behaviours and The digital euro is still in the pipes, but it seems likely that it
payment habits. They are looking for easy, rapid, and seamless will be made mandatory for merchants to accept it, with only
solutions to order online or pay for their subscriptions. On limited exceptions. Under the right conditions, and provided
that backdrop, the market has witnessed rising innovations that merchants will be able to weigh on the digital euro’s cost
often correlated with the growth of payments solutions based acceptance, this new digital currency could play a key role
on account-to-account (A2A) technology. A2A is a payment in the market as an accessible and competitive cross-border
solution where the money moves directly from the consumer’s payment solution in Europe.
bank account to the merchant’s bank account without the

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