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Europe Plans To Develop Own Instant Payment System To Move Away From US Dominance

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European Central Bank Europe
European Central Bank Europe

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Europe has revealed its plans to develop a new and improved instant payment system. This system will be developed in order to try and stem the US dominance within Europe’s payment industry.

A Replacement for TIPS

Valdis Dombrovskis, vice president of the European Commission, told the press his intents about the matter. He plans on developing and releasing a pan-European instant payment system by the year 2021. He explained that he reckons the EU’s people and companies should be capable of carrying out instant payment transactions. He stipulates that it will be both domestic and cross-border, and will be used for all the European banks’ payment solutions.

An interesting fact is that Europe already has its own instant payment system. This system goes by the name of Target Instant Payment Settlement (TIPS), but banks have been slow to accept it. Overall, the TIPS system hasn’t had a real impact on the EU financial ecosystem.

Possible Loss of Economic Edge

Benoit Coeure, a board member of the European Central Bank, gave a public statement at the same conference. He stressed the need for Europe to move away from international payment providers. He cited Europe’s dominant providers, Mastercard, Amazon, Visa, Paypal, and Apple are all companies that are based in the US.

Coeure warns against Europe facing a possible downturn of over-reliance on international service providers. He stated that Europe was “at risk of losing its economic edge.” He explains that solutions are typically specific to a single country, thus not sufficiently sized and scaled for a cross-border solution. He cites national fragmentation as the reason why the competition has been paralyzed and why innovation for a pan-European solution to have died out.

Coeure also states that the reliance on non-European payment providers is problematic on a legislative level as well. Due to the fact that it’s not situated in Europe, the bloc lacks the authority to regulate them as tightly as an EU-bound company. This limits their administration and oversight powers on it.

Europe is knee-deep in studying for a cross-border payment solution as is. One of these proposed solutions is digital currency other than Libra. The report for this study will more than likely be released to the press in the months to come.

US Innovating

Even the US Federal Reserve Bank has plans to innovate. They recently made an announcement showing their plans regarding the development of a new payment system. This “round-the-clock real-time” system has an estimated launch date of 2023 or 2024. This system will be capable of providing instant payments, with the intent on rivaling the private sector’s counterparts

How this all will play out remains to be seen, but it’s fascinating to see the measures countries are making to stay on the bleeding edge of economic development.

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