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Mobile wallets offer potential for growing SEPA payments market, says EPC

Standardising the design and improving the interoperability and security of mobile wallets could help with the development of an integrated payments market in Europe, the European Payments Council (EPC) has said.

In a new white paper on mobile wallet payments (58-page / 3.30 MB PDF), the EPC said that mobile devices are "an ideal channel for SEPA payment instruments" because of their wide use by European consumers.

SEPA is the Single Euro Payments Area, which in geographical terms refers to all 28 EU member states, Iceland, Liechtenstein, Norway, Switzerland and Monaco.

In an effort to standardise payment schemes and boost cross-border electronic payments across the SEPA zone, the EPC has been involved in developing new rules and standards to govern how such transactions should be made.

A variety of different payment processing systems conforming to a range of different standards are currently in operation in EU member states, but new technical specifications, which include requiring SEPA payments to be made using a particular "payment account identifier" and in accordance with certain "message formats", have been agreed. The final deadline for EU countries to comply with the new requirements for euro currency transactions is to be pushed back until August.

The EPC has now said that mobile wallets offer potential for growing the market for SEPA payments.

"A mobile wallet clearly offers the potential to bring convenience to the consumer/payer for the initiation and authentication for mobile payments while it allows the beneficiaries/merchants to enhance their offerings," the EPC said in its paper.

"However its potential success will very strongly depend on its value proposition to the consumers. No one in the payment ecosystem knows how exactly the mobile wallet marketplace will evolve in the coming years. But the offering of additional mobile services (such as ticketing, loyalty, couponing, etc.) next to financial services appears to be important drivers for the value proposition. Consumers need to be motivated to try mobile wallets so that they get convinced that it is secure and ubiquitous," it said.

The bank industry body identified some barriers to the future success of mobile wallets have still to be addressed. Those include making the consumer experience more consistent through the "harmonisation of user interfaces", such as the applications for making and authenticating mobile payments, it said.

Other challenges to be overcome include finding ways for mobile wallets to provide both a mechanism for payment in addition to other mobile services and to allow for owners of devices to use a number of different mobile wallets on their device, it added.

The EPC also said that improving the way mobile wallets link payment providers and retailers when payments are to be processed is another of the "key challenges" that needs addressed.

Improving the way mobile wallet interfaces interoperate with one another and aligning existing and forthcoming security requirements that apply to mobile payments generally to mobile wallet interfaces and infrastructure is one of the other issues to be tackled, the EPC said.

In November last year, the European Central Bank opened a consultation on draft new security standards for mobile payments that it said payment service providers (PSPs) and 'mobile payment solution providers' (MPSPs) should have to adhere to. MPSPs are defined as the "governance authorities of payment instrument schemes developing and offering payment services".

The recommendations were issued with a variety of different forms of mobile payment mechanisms in mind, including 'near-field communication' contactless payment technology and payments made through mobile apps. Payments made on a mobile device via a standard web browser are outside the scope of the recommendations.

Among its recommendations, the ECB called for there to be an audit trail for mobile payments and also proposed customer identification and authentication measures be put in place to mitigate against the risk of fraud and money laundering.

The ECB previously finalised new security standards for internet payments.

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