Can paying become too easy? Questions regarding frictionless payments at the crossroads of public policy objectives

Abstract

Rapid digitisation has paved the way for a plethora of innovative payment methods, aimed at eliminating payment frictions. Frictionless payments are at a crossroads of public policy objectives including innovation, customer convenience, sustainability, consumer protection and financial inclusion. The complexity in balancing these objectives requires discussion from an early stage, to prevent unintended policy effects for (certain groups of) consumers. This paper highlights that European payment services legislation does not yet fully address the unique challenges of frictionless payments, resulting in a situation where the risks could outweigh the opportunities. To this end, the paper raises several issues for further discussion and proposes a policy framework for frictionless payments. Several aspects could be considered in such a framework, notably: giving consumers more control by requiring explicit consent before actual payment, and providing alternative options for effecting payment; improving awareness regarding innovative payment methods; improving financial literacy, digital skills and fraud knowledge; including the estimated carbon emission of a specific purchase in account statements; specifying and developing authorisation in the Revised Payments Services Directive; enabling the immediate reclaiming of incorrectly debited amounts; blocking certain debtors from payment accounts; ensuring that online permission dashboards are easily accessible and usable for consumers; and ensuring the difference between differentiation and discrimination of decisions by self-learning algorithms.