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Economy

Future of payments beyond borders opens new doors for banking

Sergio Dalla Riva, Head of Product Development, Global Transaction Banking at Intesa Sanpaolo’s IMI CIB

The much-needed evolution sets out to transcend traditional payment systems and do away with its problems in the process – namely lack of transparency, excessively long settlement times and poor interoperability among banking systems, especially across borders.

The EU project involves balancing the commercial considerations of banks and retailers with the sovereignty concerns of payment supervisors in a digital-first world.

With open banking systems already emergent and digital payments the hero of the post-pandemic recovery, it is a well-timed initiative.

Although the pandemic slowed the growth of electronic payments, Italy saw a 33% increase, driven by e-money transactions (+22%) and card transactions (+17%), especially contactless payments. The 2021 recovery relied on both e-money transactions (+22%) and card transactions (+17%), driven mainly by contactless payments.

“The EU is working to constantly improve the resilience and independence of the payment system, topics that are under the spotlight in our specific historical moment,” says Sergio Dalla Riva, Head of Product Development, Global Transaction Banking at Intesa Sanpaolo’s IMI Corporate and Investment Banking Division.

“The European payments space is set to become highly digitalised, secure, open to innovation and customer-centric.”

Sergio Dalla Riva, Head of Product Development, Global Transaction Banking at Intesa Sanpaolo’s IMI Corporate and Investment Banking Division

Digital payments, cashless payments and digital wallet

The initiative complements emerging trends in the payments space. Strong growth in cashless payments in Europe is expected over the coming years, amounting to more than 60% in the 2020-2025 period and nearly 40% over the following five years (2025-2030), when the number of transactions will exceed 500 billion.

Those transactions will take place in an increasingly open digital environment, within which formerly walled-off competitors such as banks and fintechs will become cooperative nodes in a borderless network.

This transformation is already well under way, powered by financial innovators and steered by EU payments directives that are on the horizon in next months, such as review of Payment System Directive and the Initiative on Instant Payments.

This will be followed in September 2023 by the Data Act, which will make it easier for data to be shared for commercial gain without compromising individual privacy.

“We think that in the incoming years payments will be improved in speed, transparency, cost and reconciliation, and will be easier to reach different countries,” says Sergio Dalla Riva, “with all actors being sure of the progress of the payment process end-to-end, especially for cross-border payments.”

Payment speed across borders is just one benefit of this redesign of the system. Digital wallets will also provide consumer and business convenience, while increased cooperation between banks, fintechs and regulators will tighten payment security and reduce fraud risk

Digital euro

Giancarlo Esposito, Head of Payments, Cash Management and Open Banking, Global Transaction Banking in the IMI CIB

Another development on the horizon is the digital euro – at present only in its infancy but something that could be the final element of a truly renewed pan-European payments system.

“It’s difficult to forecast what the impact of the digital euro will be at this stage,” says Giancarlo Esposito, Head of Payments, Cash Management and Open Banking, Global Transaction Banking in the IMI Corporate and Investment Banking Division. “However, it is easily predictable that a full digital currency, issued by the central bank, will create disruption among all participants in the market.”

Amid all this change Intesa Sanpaolo, the eurozone’s third-largest banking group by market capitalization, is highly active, and is part of all relevant working groups on major initiatives, both regulatory and market-based.

Immediate Cross Border Payments (IXB)

One of the latest developments is the Immediate Cross-Border Payments (IXB) system from EBA Clearing, The Clearing House and SWIFT. Its pilot service is on track and is set to revolutionise cross-border payments. The IXB service will leverage the existing real-time payment systems in the US, run by The Clearing House; and RT1 in Europe, run by EBA Clearing. IXB will begin processing the first live transactions in the euro and US dollar currency corridor over the coming months.

“Our role is being part of the change, that means addressing customers’ needs and expectations. It also means advising the payment market to focus on evolutions and products that are effective – both for customers and for the process of digitalisation and internationalisation.

A lot of investments are planned for the incoming year – to open new payment corridors and to create advanced and integrated liquidity management solutions.”

 

 

Giancarlo Esposito, Head of Payments, Cash Management and Open Banking, Global Transaction Banking in the IMI Corporate and Investment Banking Division

Last updated 4 November 2022

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