2 PAYMENT METHOD PROFILES: PAY BY BANK
Case Study: European Union SEPA is a payment integration initiative of the European Union designed for the simplification of bank transfers denominated in euros. It was introduced for credit transfers in 2008, followed by direct debits in 2009, and fully implemented by 2014 in the euro area via government mandate of issuer participation for the direct debit, credit transfer, and instant credit products. 479 The SEPA integration initiative was initially pursued by the European Commission, the European Parliament, the Council of the EU representing the EU governments, and the European Central Bank. 480 Upon the launch of the process to develop SEPA, the banking sector was expected to contribute the resources required to develop instruments for electronic euro payments. The banking sector therefore created the European Payments Council (EPC) in 2002. 481 The EPC is a non-profit organization consisting of payment service providers that sit outside of the EU institutional framework. The organization serves a technical capacity to develop SEPA products. 482 In the last year, the third Payment Services Directive (PSD3) remains pending. While its predecessor, PSD2, provided third-party providers and data aggregators more access to consumer information and set controls for consumer authentication, PSD3 will further push to enable Open Banking within the Eurozone. 483, 484, 485, 486 SEPA Direct Debit has provided a unique competition dynamic between Germany’s local card scheme Girocard and the pay-by-bank solution. A Girocard transaction offers full protection of payment, no chargebacks, and is debited from the account at T+2. 487 Direct debit pulls typically at T+2 but does not offer similar risk protections. 488 Girocard fees range but typically sit around 20 basis points and are negotiable. 489 In this environment there is an opportunity for merchants to negotiate between the two solutions. Tradeoffs include Girocard requiring PIN as opposed to SEPA-LV’s signature; Moreover, contactless is available but there is not a cap for direct debit as opposed to the 50 Euro cap for Girocard. 490, 491 With similar capabilities and competitive pricing, merchants can derive positive outcomes by considering both solutions.
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