ECB member expects blockchain to transform payments

A member of the European Central Bank’s (ECB) executive board forecasts that the payment cards industry will be challenged by strong competition from innovative solutions based on payment instruments other than cards.

Yves Mersch singled out blockchain technology, which has already persuaded major banks and financial technology (fintech) groups to begin research into potential usage.

Mersch offered his views earlier this week when addressing a Bank of France conference in Paris. In his speech, entitled ‘Card payments in Europe – latest trends and challenges’, he forecast: “The emergence of innovative payment solutions will impact payment behaviour and the usage of cards and other traditional payment instruments in the years to come.

“There is the challenge of distributed ledger technologies. These technologies, of which blockchain is probably the best-known example, can potentially have a profound impact on the whole financial ‘ecosystem’. Their adoption has the potential to disrupt both the use of traditional payment instruments and services and the payments processing industry.”

Mersch added that the card industry will face competition from instant payments based on the single euro payments area (SEPA) credit transfer (SCT), ranging from payment initiation services in the area of e-commerce to the adoption of distributed ledger technologies. The Euro Retail Payments Board (ERPB), set up by the ECB, has asked the European Payments Council (EPC) to develop an instant payment scheme for euro payments based on the SCT system.

He concluded: “This competition is welcome, provided the solutions offered in the market are secure and efficient and service providers play by the same rules. I am confident that the cards industry will find the right responses to these challenges – and to the benefit of users.”

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