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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?
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Diederik Bruggink is Managing Director of Bruggink Consultancy and is an independent international expert in cards, payments, and market infrastructures. During his career, he has led and worked on several international and high-visibility projects, mainly with a focus on cashless payments, across the whole payments value chain, from (e-commerce) merchant acquisition through to issuing banks and within card switching and card processing organisations. He was one of the key authors of the first three editions of the ‘World Payments Report’, and he makes regular appearances on conferences in the cards and payments industry. He is a member of the Editorial Board of the Journal of Payments Strategy & Systems.
Carlo R. W. De Meijer is Economist and Senior Researcher for Market Engagement at Royal Bank of Scotland. He has a Master’s degree in International Economics from the University of Tilburg (1977). During his career, Carlo has held various positions, both as a senior economist and private investment advisor. He has published many papers on various economic and financial topics, especially related to international financial markets and to European financial and monetary integration.