Publication 28 September 2020

The digital transformation of payments: An economic challenge, a citizens’ issue

AUTHORS

  • Clément Le Ludec

  • Ruben Narzul

As the European Commission adopts its Digital Finance Package, Renaissance Numérique stresses the strategic nature of the retail payments sector for the European Union in this publication: "The digital transformation of payments: An economic challenge, a citizens' issue". Means of payment stand at the crossroads of our societies' evolution and are now closely linked to various issues such as our purchasing power, the protection of our privacy, security, inclusion, sovereignty and, more recently, health. In this context, the think tank is calling for consideration to be given to the citizen dimension of this sector in the European strategy.

A strategic sector for the European Union

Electronic payments have undergone major developments in recent years, driven by the rise of new technologies such as contactless solutions, mobile phones or e-commerce, as well as by changes in EU regulations. This transformation is also largely driven by digital players who are occupying an ever-increasing place in our daily lives, such as Uber or Amazon. They act as vectors for the rapid dissemination of new payment uses, which ultimately benefit non-European companies. The development of mobile payment services (Apple Pay, Google Pay, Samsung Pay, AliPay, WeChat Pay), crypto-currencies (Libra) and instant payment solutions (e.g. Tencent’s investments in Lydia and Qonto) foreshadows a future market loss for European players. One of the challenges for Europe will therefore result in its ability to compete with the level of investment of these players.

Giving back control to citizens over their payment data

Data has become an essential asset for the development of new services in the banking, financial and insurance sectors. But payment data is also valuable for other sectors of the economy, as it reveals online and offline consumption patterns. We are moving towards a hyperconnection of services based on the exploitation of payment data, gradually encroaching on the anonymity of transactions. While regulatory texts overlap (the General Data Protection Regulation and Payment Services Directive, in particular) or are applied differently within Member States, there is a need to clarify existing rules on privacy in Europe’s payment sector. With the introduction of electronic money and the gradual disappearance of cash, it appears relevant to collectively question the anonymity regime that we wish to preserve. Maintaining access to an offer that preserves anonymity is indeed a public service mission. Moreover, consumers’ control over their personal data must also involve the strengthening of their actual capacity to consent or not to any intervention by a third party on their data.

Making access to payments a full-fledged component of digital inclusion policies

Nevertheless, Europe should not view consumer protection solely through the prism of data protection. Although Member States generally have the final say on e-inclusion policies, the European Union must make it an integral part of its strategy on payments. Alongside financial fragility, a new form of exclusion is gradually emerging in the field of payment methods, linked to their digital transformation: either by reinforcing the difficulties of people who are already financially weakened, or by excluding new audiences who are struggling with digital solutions. In addition to consumers, many craftspersons, shopkeepers, VSEs and SMEs are insufficiently prepared for changes in electronic payment practices. Navigating this transformation requires a minimum of knowledge and not only in the digital field, all the more so at a time when personalized decision-making tools are being deployed to help individuals.