 My name is Nasa Hanafi and I work in the civil society team in communications at the European Central Bank and I am delighted to have Iddo Deyong with us today. Iddo is team lead in the market innovation and integration division of the director general market infrastructure and payments. He is responsible for policy development on innovative payment solutions and he coordinated the ECB retail payment strategy which is a topic of our session today. Iddo will present the main goals of the ECB retail payment strategy as well as the reasons for this strategy and the ECB's role in the retail payments. Before I give the floor to Iddo, I would like to share some practicalities on the session with you today. We'll start with the presentation around half hour and then open the floor for the remaining 30 minutes for questions. Please make good use of this question and answer session as would like to keep it as interactive as possible. You will have noted that your microphone and camera are switched off by default. However, after the presentation you will be able to turn on your camera and you will be automatically unmuted. And we'll show a slide with some instructions on how to raise your virtual hand. Finally, and as stated in the invitation, this seminar will be recorded and uploaded to the ECB's website after the event. With any further ado, I'll hand over now to our guest speaker, Iddo, the floor is yours. Thank you. Thank you, Nasser. Also, from my side, I would like to welcome you all to today's seminar. The retail payment strategy is our latest stance on what is needed to improve retail payments in the Euro area, in Europe and beyond. And I'm also keen to hear your views and your expectations for retail payments after my presentation. I will start my presentation with the reasons for our new strategy. Also explaining the tasks and the roles of the ECB which we perform together with the national central banks of the Euro area. Together we are the Euro system. Later on in my presentation, I will briefly touch upon how we organize a continuous stakeholder dialogue on retail payments. But first, why are retail payments important to economy and to society? First of all, the cost of retail payment instruments is around 1% of gross domestic product in Europe. But this 1% is just the average. At the level of a country, some countries only spend 0.7% on retail payment instruments whereas other spend almost double that amount. This makes clear that more efficient or cost efficient retail payments can save a society a lot of money. When countries migrate to electronic retail payments, this spurs overall economic development in that country. A third reason to look carefully at retail payments is that they tend to lead to market concentration. Meaning that only a few companies could dominate almost the entire market. And for instance, could set higher prices than in a situation where there was sufficient competition between providers of payment services. A further important matter is to look at the proper design of retail payments. Elements like privacy, security, prevention of fraud, transparency and rights as consumer. If we look at European retail payments, it's good perhaps to start with comparing us with some other countries around the world. As you can see in the slide and in the graph, Europe, which is on the left, has much less check usage compared to the US or Canada. In the European Union, there are more direct debits than in most other regions. Also more credit transfers, more than in the US, more than in Canada, but below Australia and South Korea. But perhaps the most striking information we can take from this overview is that there is a lot of scope to increase the usage of card payments in Europe. Or another type of payment solution, which you can use in shops and when shopping online. Why does the ECB look into retail payments? If you look up the treaty on the European Union, you will find that among our basic tasks is the task to promote smooth operation of payment systems. We may also provide facilities to ensure efficient and sound clearing and payment systems. Lastly, we shall be consultants and we may advise on any proposed EU Act or any national legislative provision when it falls in our fields of competence. What does it mean to promote the smooth operation of payment systems? Generally, it is considered that there are three functions. First is to have a conversation, a dialogue with stakeholders and trying to persuade them to improve the way payments are made and received. This is called a catalyst role. The second role is the one of an operator. We offer payment systems to commercial banks as we are then the central place for them to make payments to each other. The third role is the one in which we supervise payment systems and payment instruments. This is called the oversight function and these together are the three roles the ECB has in retail payments. Since the start of the ECB, and that is 21 years ago, our focus in retail payments has been on integration. Integrating the various systems that were present in the countries forming the Euro area. The major achievements have been the delivery of a European credit transfer or a SEPA credit transfer and also a SEPA direct debit in 2008 and 2009. However, this process of integrating the different national payment systems and payment setups is incomplete. For instance, we don't have electronic mandates that you can give for a direct debit. Some complaints still come in about urban discrimination, meaning that you can't use your payment account for making payments in another country. So it's important to note that even though we are 20 years on our way, still things are incomplete. Whereas the first phase of SEPA was focused on integration, in recent years we have spent more time and could spend more attention to modernize payment services. To stimulate innovation and to foster competition. Basically, to try and make European retail payments ready for the digital age. One good example of this is the introduction of instant payments. So payments that arrive at the beneficiary within 10 seconds. For this, the market has launched the SEPA credit transfer instant scheme in November 2017. At the moment, 59% of European banks adhere to this scheme and can offer it to their customers. But the actual usage, the uptake of SEPA credit transfer is only about 9% of credit transfers. So a lot of work is still needed. This is also important because SEPA credit transfer instant can be the basis of new services, innovative payment solutions, including for paying in a shop where the credit transfer is set up with a card. At ECB, we have ensured that there is a pan-European processing infrastructure for instant payments that will enable full reachability, meaning that all banks can reach each other for making and receiving SEPA credit transfer instant payments. Important implementing measures are being taken this year. The European legislators have also adopted the modern European law, the revised payment services directive, which provides a legal basis for innovative payment services based on access to payment account. Work is ongoing to standardize the interfaces that FinTech companies can use to make payments on behalf of the customer. Work is still on its way in this field. If we look at the broader picture and we look at the status of retail payments in Europe, we do see that for card payment transactions, 70% of those are made with cards from international card schemes. And this percentage has been steadily increasing over the past decade. We also can see that we don't have a European or a pan-European solution for making e-commerce payments. In fact, those are dominated by one global provider. For making online payments, also card schemes are used. Now, I didn't put the names of these companies on this slide because it's not about the specific companies. It is about that we are relying for the bulk of our payment transactions on just three companies. This is evidence of how payment systems can lead to a market concentration in which only few providers remain active. This would now enable them to set higher prices than it would have been the case if there were still plenty of providers. Another reason for some concern is that these are companies that are active on a global level. This means that they might not be able to adjust their products and services exactly to the European requirements. One example may have been the migration to the EMV chip, which has provided more security for card payments. And we can also see that various countries around the world outside of Europe have chosen to set up their own card scheme to be less dependent on others for the core of their payment services. One further development that we notice is that Big Tech, and I will explain it on the next slide, might move more deeply into the profession of retail payments. Some of the well-known Big Tech companies are on this slide together with the number of countries they are active in. In contrast to how payment services are normally organized, where you have multiple banks offering services to end users based on common rules between those banks, based on systems for the processing of transactions, and finally for the settlement of these transactions, Big Tech is more focused on the user experience. They are able to organize all processes within their own house. Furthermore, it might be that instead of relying on the euro and processing in euro, they might replace that with something what is called stablecoin. So it's a fundamental change to retail payments, and it's important to be prepared for such potential changes. It's one of the reasons why work has started, preparatory work has started, to be able to issue a digital euro should the need arise. As mentioned at the start of my presentation, we take stakeholder dialogue very serious at the ECB and certainly for payments. We have set up some years ago the Euro Retail Payments Board. That's a high level strategic body tasked with fostering the integration, innovation and competitiveness of Euro Retail Payments in the European Union. It was launched in December 2013, but before that already a similar type of institution existed. Important is that it brings together the user side of retail payments, and I've listed the organizations that participate to the Euro Retail Payments Board. And on the other side, it is the provider of payment services, not just banks, but also the electronic money institutions, the payment institutions and the third party providers. They meet twice a year, and they discuss and hopefully agree on the common priorities for the development of retail payments in the Euro area. Over the years, the UPB has worked on many important topics for retail payments based on the priority set. Currently, the UPB has worked on transparency for end users so that it's clear from your account statement which payments you have made. The SEPA API access scheme is to enable third party providers together with banks to make full use of the opportunities that were created with the payment services directive. And also access to CAS is a concern of stakeholders and the UPB is looking into ways to improve that. Now let me come to the main item of the presentation, but I think the background is almost as important. The retail payment strategy was launched in November 2019. Its main goal is to support and foster the development of pan-European payment solutions in shops and online. And together we call this the point of interaction between the payer and the payee. You had seen that there is a high reliance on only a few companies for card payments and for e-commerce payments. So it comes to no surprise that this is the top priority. Last year, this strategy was complemented with the following goals, the full deployment of instant payments. I mentioned that users stood at 9% who would like to see this grow to 100% if possible. I spoke a lot about the Euro area, about Europe, with also payments that go into the European Union or come out of the European Union. It is a topic that has been neglected a bit and there is a global initiative to improve also these type of retail payments. We like to support innovation and also an innovative payments ecosystem where banks and Sintek companies can compete and can work together to improve retail payments and to deliver more choice to consumers. The environmental sustainability of payments, we are looking into that. We are starting a study on improving that. And I mentioned accessibility, especially in the digital age, it's more important that every citizen can have use to payment systems. The top priority is the support of market initiatives that launch a truly pan-European point of interaction payment solution. We will support any market initiative that is willing to adhere to five key objectives, including a pan-European reach and customer experience. And of course, convenient and cost efficient, safe and secure with a recognizable European brand and also governance and management of the payment solution that would ensure that European requirements are met. In the long term, we would also like such a payment solution to be acceptable around the world. And in July 2020, we have welcomed the European payments initiative, which is the only initiative so far that we have welcomed together with the European Commission, but we remain open to engage with other initiatives. To tell you a bit more about the European payments initiative, it is developing a solution for card online and mobile payments with a harmonized card digital wallet, which would be usable across Europe. The start is made by banks from eight countries. One is the euro area plus one from Poland. They are concentrating on setting up the solution at the moment, but thereafter they will focus again on expanding to all countries of the euro area and Europe. These are the goals of the retail payment strategy. Instant payments need to be offered to all individuals and businesses and under attractive conditions. Obstacles need to be overcome. One specific challenge is the need for anti-money laundering checks, which need to happen in real time. By improving cross-border payments will support people and businesses when making and receiving payments from overseas. Actively supporting a European ecosystem for payments will help opening up for innovation and competition, including by non-banks like FinTechs. We are addressing the environmental sustainability payment transactions and infrastructures. We would like to ensure that all Europeans have access to safe, efficient and convenient payments in view of the all-encompassing digitalization process. This retail payment strategy does not stand by itself. At the same time we are analyzing and experimenting on a digital euro. We have also adopted the cash strategy and we have developed recently a new oversimped framework. Then let me conclude, despite the separate achievements, gaps remain. We don't have a pan-European card scheme. There is no pan-European e-commerce payment solution and the uptake of instant payments has been slow so far. We noticed the expansion of Big Tech in payments, possibly with a completely new arrangement based on global stablecoins. The retail payment strategy is there to meet European stakeholders' needs and expectations for an increasingly digital economy and society. Preparatory work is ongoing should the need arise to introduce a digital euro. More European integration is needed, more innovation, more competition and more sovereignty. I am very keen to hear your views and your expectations for retail payments. Thank you very much. Thank you very much, Ido. I have a very interesting presentation. We all agree that you have covered a wide range of important topics. Ladies and gentlemen, let me remind that if you experience any technical issues or have a question, please reach out to us by using the chat function and make sure you send your message to all panelists. We are very much interested to hear your views now. It's time to make this session as interactive as possible and you will see now a slide with some instructions on how to raise your virtual hand. When I see your hand, I will call your name. You will be unmuted automatically and will be able to turn on your camera. Please introduce yourself shortly before asking your question. This might take a moment or two until we have the first question. And I would like to start with Mr. John Walker. I said, you will be able now to turn on your camera, please. The floor is yours. Thank you, Chairman. Can I be heard? Yes, please. Thank you very much. Some of the topics which you covered are retail people going to shops and buying things. But some of your presentation related to e-commerce, and I'm sorry if I'm slightly off script, but prior to Brexit, it was possible to send money sterling from the Euro area to the UK without having penal charges. Now there's a penal charge, which for small payments is, I find, at 35 Euros plus VAT to send an electronic payment from the Euro area to the UK to be rather high for something that could be about £200. So we managed to find one way out, this is the European Small Business Alliance, to spend the whole payment for one year rather than paying it quarterly, which actually saved us a bit on bank charges. Before Brexit, it cost 10 Euros plus VAT to send a payment from Belgium to the UK. Now these suppliers have been with us for a long time and they provide the services that we need. And I know possibly during trade with the UK is not the sort of thing you want to discuss, but nevertheless there is a commercial need to have these two clients in the UK providing the alliance with services, which they've done for many years and know our requirements. I'm just wondering if something, whether these charges, if we send Euros from Belgium to the UK, it costs £7. If it's sent in sterling, it costs 42 Euros including VAT. So I'm sure I'm not the only business with this type of issue where all of a sudden bank charges have gone up by 300%, which does seem rather challenging for not just us but many others. I hope I'm not too off-script in raising that, but it is certainly an issue that hopefully will be looked at at some point. Thank you. Thank you Mr. Worker. Thank you very much for your question. It does remind me about the situation before the start of SEPA, before the start of the Euro where indeed making payments across countries was very expensive. A payment from the Netherlands to Spain, which could indeed cost you 10-20 Euros, also as a private citizen and I'm sure also for businesses. So it took also legislation, European legislation, that prescribed that banks cannot differentiate in their prices when you make a payment within Germany or from Germany to Greece. Of course you mentioned Brexit has implied that some of these laws do no longer apply when you make payments from the UK to the European Union. There is not much I can say about it. I mean we have certainly heard this complaint before, but for mostly it seems to be based on legislation not longer applying to these transactions. We do hope to improve cross-border payments in general because also when you make a payment from Europe to the Philippines, people are faced with high charges. So in that sense the problem in general is on the agenda and not just for the ECB, but in fact around the world. It's a topic that is discussed under the G20 of the major industrial countries. So work is done, but the specific reason for this fee is now applying is indeed because of the law no longer applying. Thank you very much. Mr. Walker, let me remind you to lower your virtual hand please after you ask your question. The second question we have from, allow me, I don't know, Mr. Ms. Orien Tuja. Sorry, I can't see the full name here. Please turn on your camera, introduce yourself shortly and take the floor. Thank you very much and you pronounced it quite well. Thank you very much for your presentation. I'm Orien Tuja Batsahan from Positive Money Europe and I would like to ask a question related to of course our current situation and the global pandemic and there is quite a bit of research and evidence based research as well as anecdotal evidence emerging on the preference of card payments over, let's say physical cash. In relation to that, I wanted to ask what's the kind of emerging evidence for the euro area for Europe and what does it mean for retail payment strategy going forward. And another question, if there is evidence of use of cards and more online payments and as we go in the future, then how do we ensure that there is a maximum financial inclusion? And not only that, but also data protection. Thank you very much. Thank you. Thank you for your more than one question. Well, at least two questions I will try to answer them. Indeed, we have also done studies ourselves into the payment behavior during the pandemic and how it is different from how we used to pay before. Indeed, there is a higher preference for using card payments, especially those type of card payments where you don't need to touch anything. Including not typing in your pin number. We do think this will be a trend that will continue also when the pandemic will be subsiding. I mean, for ECB, we also still remain responsible for issuing of euro banknotes. So we don't have a view on card users versus banknotes users, we just try to facilitate both in the best possible way. Financial inclusion could indeed be a bigger issue of concern. Not everybody is as able to use smartphones, digital payment solutions. So it's actually one of the one of the goals of the retail payment strategy to look into the we call it accessibility. It's maybe not exactly the same as financial inclusion, but we do want to study and ensure that all citizens have access also to the more digital payment solutions that we are using more and more. Thank you. Thank you. It's promising to be really active. I'm delighted to see a question coming in. The next question comes from John Ali. As usual, please, you will be automatically unmuted. Turn on your camera and take the floor. Thank you. My name is Jean-Alexandre presenting as the the Bergs European Consumer Organization, an old friend of Edo. My question is about what you have said at the beginning of your presentation. When you have said that in terms of GDP, in some countries 0.7% in some in other countries, it's 135 and you say quite a double. Can you go into more detail about that? Oh, can you explain that there is such a huge difference from one country to another as regards the cost for the society in particular for consumers, of course, of payment. Is it a question of lack of competition? Is it a behavior of some banks in some country? Is it banks which are not efficient in some countries and much more efficient in other countries? I would like to have more background on your policy when you see the difference from one country to the other as regards the cost of payment for consumers. And so between friends. Yes, okay. Thank you, Jean, for your question. Indeed, there are big differences between countries that were part of this study. And I think all of the reasons that you mentioned add to this big difference. In the mix of payment services used. I mean just an example to pay with a check, to process a paper check, to physically move it from the shop to the bank of the shop. Sometimes all the way to the bank who issued the check. This involves a lot of cost. This is into the cost of payments. So it's not per se the price levels that consumers face. It is the cost of reducing these these payment services. Competition can also make a difference. If there are only a few major providers. Maybe it's easier for them to set to have less incentive to be efficient and they can set higher prices to consumers. Stimulating competition also from other types of players, supervised non bank providers could help. We are keen to to repeat this this study, but as you can imagine it takes a lot of work to get into the details in and also in all European countries. I think gradually the move to more electronic retail payments has helped to reduce the cost of retail payment systems. As I said, we are very keen to do another study to to see the latest situation. Thank you. You know, before we take the question from Mr Martin smart street. I would like to have a comment with the chat from Mr Walker. Like to share with you. He says I fully agree with the point about not everyone having a mobile smartphone. There can be digital exclude exclusion for those without one. Thanks for that comment. Well noted. So, Mr Schman sleep. Maltz read. Please turn on your camera and reduce yourself. And the floors yours might take a minute. Hello. Yes. Okay. So I'm Martin Schmalz reader work for the Confederation family organizations called the safe families Europe. You mentioned about you were talking about competition and the importance of competition. And you also mentioned stable coins, as you probably know, there are many stable coins dominated in other currencies, for instance, the Canadian dollar, the Australian dollar, even the pound, the bridge pound, the US dollar. So of course, to transfer those stable coins from one wallet to another, very easy to open wallets also with no impendements whatsoever. There is yet, I think there's one European stable coin that is in development. But to my knowledge, there isn't a real operational one that is globally used at this moment. Do you have a reason for that, or do you have some insights into that, or, and do you think that there will be developments of such stable points equivalent to the dollar denominated ones in the future. Thank you very much. An interesting question, maybe not an easy question to answer. In general, the ECB, the Euro system we favor innovation, we favor competition. But we also think it's necessary to have a level playing field when it comes to regulating the providers of payment services supervising them. And maybe the approach in Europe has focused more on ensuring that such providers of stable coins do need to first meet the requirements of law and of supervision. And in some other jurisdictions, the emphasis has been different, but I can't speculate on what companies might do in future. Thank you, Ido. I actually was waiting for someone to reflect on something you mentioned, your presentation, and maybe I will do that. I took a note that you spoke about supporting an innovative European ecosystem for banks and non-banks like FinTechs. Could you elaborate more, why should the ECB make a difference between banks and non-banks? Yes, thank you. Here it's important to say that in general, banks provide payment services in a specific way, and we see that other types of entities, maybe smaller entities, technologically agile companies that have more direct contact with retailers, e-commerce websites, maybe they are able to organize themselves differently, offer different type of payment solutions, so we're actually increasing the choice available to retailers, to merchants and shopkeepers. So there we think it's important to enable both type of providers to provide their payment services, and it's important to say that they are supervised, banks are supervised, and also these FinTech providers are supervised, so they do have to follow the same set of rules. But when there is a proper level playing field, we think this can increase choice and also meet the requirements of retailers better. Can I change you a little bit more? You mentioned in your presentation European sovereignty. Is that the topic for the ECB or why is that important for retail payments? Yeah, European sovereignty as such, we would have to look into what we mean by that. In my presentation, I mentioned how if you rely on global companies, you cannot be sure that these global companies can listen to European requirements. They will have to listen to the whole world and they have to make the decisions based on that. So sovereignty means that you are able yourself to make sure that the payment services that are being offered also meet the requirements of European stakeholders. And that's actually what we mean, that we do not rely or depend on a few companies, but that if stakeholders together agree that there is a need to work on a specific European payment solution that we can also make that happen. Thank you very much for that. Let me check if we still have some questions from our audience. By now doesn't look like that. Ladies and gentlemen, if you have questions, I would interest in any other topic that you would like us to present in future seminars. Please reach out to us. Our email address is civil society to one word civil society at ecb.oropa.eu. I think we can close now. Of course, I would like to thank you for this presentation. Thank you very much. Thank you very much. Ladies and gentlemen for being with us today. We are very interested to hear your views. Again, not only on the topic of today's but in general, your views are very important to us. Right now we will share with you a short survey in the chat. It should take not more than two minutes of your time to complete and it will help us tailoring our topics for you in the future. Thank you very much and goodbye.