Card payments continue to shape the world around us. Technological innovations, combined with new legislation that spurs competition among stakeholders, have and will continue to influence the landscape of card payments in Europe. This has large-scale effects in the fields of (i) security, with the appearance of not-yet-mature solutions on the market that may impose a security risk for users; (ii) sovereignty, with the increased adoption of payment solutions from non-European market players; and (iii) market integration, with the risk of fragmentation of the European market due to the emergence of proprietary local solutions that do not allow pan-European reach.
Card issuance and usage continue to grow, with solid annual growth rates throughout the European Union. However, new market entrants with innovative payment services and instant payments could erode the share of cards in the European markets. This is why the Eurosystem encourages cooperation between the existing European card schemes and supports market initiatives working towards a SEPA for cards.
Security, in particular fraud prevention, is an important element of any card solution. It is a key driver for innovation, ensuring that consumers and businesses have confidence in the safety of their accounts and devices. For example, the democratization of deep learning and AI makes it possible to institutionalize next-generation fraud monitoring by analyzing hundreds of transaction attributes in real-time. This has helped to avert $25 billion worth of fraud in 2019 alone.
Other security trends to watch for include biometric authentication. Many companies are piloting facial, voice, and fingerprint recognition software to verify a customer’s identity before completing a purchase. This technology is gaining momentum and will likely be integrated into mobile wallets in the near future.
Another trend to be aware of is the increasing presence of peer-to-peer payments or P2P. These are apps that let people transfer money from their bank account or credit card to other accounts they hold, often without a traditional payment instrument such as a debit or credit card. This includes the popular Venmo, Cash App, PayPal, and Apple Pay applications. Search interest in these applications has increased by more than 100% over the past five years.
The COVID-19 pandemic also introduced a number of other emerging payment trends, including the increased distribution of disaster payments, contactless payment limits in Australia, and the rapid decline in cash use globally. While these changes are not likely to have a major impact on the European card payment ecosystem in the short term, it is important to keep an eye out for them and be prepared to adapt to them as they take shape.
In the longer term, it is critical to maintain the competitive edge that European innovations have provided, as well as to strengthen and extend their reach. This means continuing to develop services that are more efficient, versatile, and secure for both consumers and merchants. This will require close collaboration between existing and new market entrants in order to develop an open market for European cards.
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