The changing cards landscape in Europe

Regulators had hoped that the SEPA Cards Framework would drive industry competition. Indeed, they imagined that Europe’s national card bodies, struggling to survive under SEPA, would club together to form a third European payments body to compete with Visa and MasterCard. Yet, this development has not been forthcoming. The recent announcement that German and French banks, including Deutsche Bank and Societe Generale, have stepped up efforts to create a new European debit card scheme sounds promising but the majority would agree that the reality is still some way off. Others believe that non-European processors, such as the US’s TSYS or First Data, are more likely to take the lead in the region in terms of a third debit card scheme.

While this uncertainty exists in the market and the future cards landscape for domestic schemes and processors remains unclear, it still looks like enhanced competition - whether from within or outside Europe - is on the horizon. As a result, banks and acquirers cannot just stand by and wait for the developments to take hold. It is already clear that the legacy systems that characterise many of these banks - often developed to work with their domestic processors - will not be able to cope with the new demands placed on them.

In order to deal with future requirements, acquirers will need to ensure that their card systems are able to handle direct connections to International Schemes and their associated certification and compliance headaches, plus have the flexibility to connect to any new European scheme as it emerges.

Other key issues for acquirers that arise from the SCF are the ability to provide transparency in their merchant service charges and fees, in order to maintain their margins in the face of the pressures on Interchange, and the need to consolidate to a single platform as a result of M&A and cross-border operations, to get maximum benefit from their economies of scale.

Acquirers like everyone else in the payments business are under intense cost pressure at the moment, with survival and independence being the main goal for many. However, putting in place a modern, flexible and compliant acquiring solution will not only prepare them for whatever happens in the future, but provide immediate cost reduction benefits in the short term, and help to ensure that they are still around to take advantage of the opportunities provided by the SEPA Card Framework.