Published: December 05, 2023
Piggy-backing on the rapid digitalisation that is in train across the global economy, payments innovation has gathered speed in recent years. Here, two experts from BNP Paribas highlight some of the exciting and successful payments initiatives the bank is engaging with, including the European Payments Initiative, which promises to deliver profound benefits for corporates and consumers across the region. They also highlight key strategic partnerships and acquisitions the bank has made, such as BNPL leader, FLOA, to stay ahead on the innovation curve.
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Fuelled by new technologies and evolving business models, together with the emergence of new market players, a fresh era of innovation in payments was already in evidence before Covid-19. But the pandemic has helped to further accelerate the shift to digital payments. As a result, the behaviours of consumers and businesses are being reshaped, not least when it comes to paying for goods and services and receiving or transferring money.
Indeed, a report by PwC, Payments 2025 & Beyond, predicts global cashless payment volumes are set to increase by more than 80% from 2020 to 2025, from about one trillion transactions to almost two trillion, and to almost triple by 20301. In tandem, innovation in the payments sphere is picking up pace – not least in Europe.
We believe it is one of the most important payments innovations taking place today with far-reaching implications.
For Neil Pein, Global Head of Axepta & Head of Payments Transformation, BNP Paribas, one of the biggest payments innovations currently going through its paces is the European Payments Initiative (EPI). The initiative, backed by 16 European banks and financial services companies including BNP Paribas as a founder member, aims to create a unified, innovative pan-European payment solution leveraging SEPA Instant Credit Transfer (SCT Inst). The bold ambition for EPI is that it becomes a new standard in payments for European consumers and merchants across all types of retail transactions including in-store, online, and peer-to-peer.
"I would strongly advise corporate treasurers to pay heed to the development of EPI,” says Pein. “We believe it is one of the most important payments innovations taking place today with far-reaching implications. It has huge potential to support consumers and merchants in executing more seamless transactions, as well as alleviating payments pain points for corporate treasurers. At BNP Paribas we are working hard to make sure treasurers are aware of it, most especially now, as its development is reaching a critical phase.”
Pein goes on to explain that EPI stakeholders want to bring value to the market by offering an end-to-end payment solution covering multiple use cases in a secure, immediate and easy-to-use environment. “While there are now many instant payment schemes live around the world, including across the EU, they are domestic in operation and not all countries have them. As a result, the ability of these current schemes to alleviate pain points associated with, for instance, cross-border flows across a region, are very limited,” he says. A pan-European solution as envisaged by EPI would address these shortcomings it is believed – a view shared by supporters of the initiative, not least the European Central Bank, which has been actively encouraging the consortium to push ahead.
The initiative consists of three broad elements, namely the EPI:
Digital wallet solution: At the epicentre of EPI’s offering is the digital wallet product. A customer- centric app will facilitate payments from and to any of a customer’s eligible bank accounts with a higher degree of transparency and control than is currently available. In time, the app could hold other payment methods issued by third parties too, as well as facilitating the wide range of other services that EPI will integrate into the payment flow. These added- value services could in the future include bank funded BNPL, e-ID, or merchant loyalty programmes.
Payment means: EPI is building a flexible and secure payment scheme allowing existing instant account to account payment infrastructures to be used in a wider range of use cases. The payment applications will extend and be enhanced over time. Customers will be able to use any of their eligible bank accounts to pay instantly, securely and with ease.
Ecosystem: EPI will act as the bridge between a multitude of parties in the complex payment landscape. Technically speaking, EPI will therefore be an open 4-corner scheme.
Like Pein, Carlo Bovero, Global Head of Cards and Retail Payments at BNP Paribas, also has great hopes for the EPI solution. “Finally, with EPI, Europe will be able to leverage instant payments fully and make the most of their true potential for efficiency, speed, and transparency in a digital world. After all, half of retail payment transactions in Europe today are still carried out with cash, so the room for upside here is enormous.”
Indeed, explains Bovero, consumer groups and merchants alike have been crying out for a pan-European payment solution that replaces the fragmented landscape that currently still exists across the region. “With the EPI consortium we are now getting close to delivering the dream. Things are not going to change overnight of course, it’s a long-term innovation with long-term development plans. Nevertheless, EPI will dramatically reshape how we pay in Europe over the next five to 10 years.
To this end, the EPI consortium plans to launch the digital wallet with P2P payment functionality for first users in a pilot phase by the end of 2023 across two countries: France and Germany. A broader market launch in Belgium, France, and Germany is slated for early 2024.
With EPI, Europe will be able to leverage instant payments fully and make the most of their true potential for efficiency, speed, and transparency in a digital world.
For corporate treasurers operating in B2C sectors, EPI’s roll- out and expansion could lead to more efficient use of capital, reduced credit risk, and greater transparency. Nevertheless, careful change management will be needed to reap the benefits of EPI – and wider instant payments innovations – cautions Bovero.
“Organisations need to be prepared to invest in organisational and process change – for instance, making adjustments to payments workflows and templates, as well as reconfiguring their TMSs – to provide the 24/7/365 service that end users will increasingly demand. The rise of instant payments will also accelerate the growth of new solutions that respond to customers and corporates looking to pay within seconds and be informed about transactions simultaneously.”
More broadly, Pein points out that every new digital solution implemented by an organisation presents cybercriminals with potential openings for attack and faster payments schemes are not immune to being compromised or leveraged for financial crime. Indeed, while near-immediate payment is highly desirable for organisations and consumers it can also make it extremely difficult if not impossible to retract payments in case of errors or fraud.
Bovero comments: “Fraud management must go hand in hand with payments innovation. So much so that the first task for organisations when engaging with instant payments is to ensure employees are made even more aware of the dangers of fraud.”
Banks play a vital role in helping corporate clients address security by offering advisory services as well as targeted solutions. Forward-thinking banks have therefore teamed up with fintechs to develop solutions that specifically address real-time threats. BNP Paribas, for example, has joined forces with Sis ID, a fintech that has developed a novel solution for institutions to check bank details of beneficiaries and customers in real-time and throughout the entire payments chain. For very large, resource-rich corporates that have many suppliers, and communicate with their banks in host-to-host mode, BNP Paribas suggests entering into a direct commercial relationship with fintech players such as Sis ID. This would enable the solution to be integrated directly with ERPs and TMSs, and the leveraging of existing bank connectivity.
The Sis ID partnership is just one example of how BNP Paribas innovates in collaboration with third-parties. In 2021, for instance, the bank joined forces with fintech Token, a leading open banking payments platform, to launch Instanea. Combining the power of SCT Inst and PSD2 APIs, Instanea is a turnkey instant payments initiation solution, delivering A2A payment capabilities to enhance the speed and increase the security of transactions for merchants across Europe.
Bovero says Token’s open payments platform provides pan-European connectivity to banks, and rich functionality to enable existing payment service providers (PSPs) to benefit from open banking capabilities. He adds: “BNP Paribas Instanea can easily integrate with popular shopping cart platforms and payment gateways to deliver immediate payment settlement and enhance security. Risks such as chargebacks, are also eliminated because payments are authenticated by the customer in their banking portal.
“There is a paradigm shift taking place in the B2B space. E-commerce and marketplaces are quickly taking a more prominent role, B2B buyers and sellers both want a more seamless end-to-end experience. Consequently, payment channels that are popular in the B2C sector are now entering the B2B sector.
“In such a rapidly evolving environment, digital payment initiation solutions such as Instanea are seeing spectacular growth, enabling companies to digitise and be more in control of the receivables process. Adapting to this new trend is the perfect opportunity for treasury functions to review and streamline the entire order-to-cash and procure-to-pay cycles and find more efficiencies.”
To further bolster its digital payments and credit solutions expertise across the e-commerce space, BNP Paribas acquired FLOA in February 2022, a French web and mobile solutions provider and a leader in BNPL in France. Pein says that in a fast- evolving e-commerce market, FLOA’s European footprint and expertise combined with the BNP Paribas business is a win-win for both organisations, and of course their end-clients.
He notes: “FLOA enables BNP Paribas to strengthen its portfolio of innovative payments and credit solutions to provide a complete offering to its customers in Europe. We have strong ambitions to accelerate our payments presence in this growing sector.”
While expectations of FLOA are high at BNP Paribas, another slightly more mature payments-focused acquisition, Nickel, purchased by the bank in 2017, has already proved itself as an astute buy. A provider of online payments accounts, Nickel is hugely popular with more than two million customers in France alone and just over three million in total. It’s not difficult to see why it is proving such a hit: customers can open a Nickel account, receive an IBAN and obtain an international Mastercard debit card at a newsagent or tobacco kiosk in less than 10 minutes.
Pein says: “Nickel is a really big success for us. It originated as a neobank and it’s one of the few profitable enterprises to have emerged from that space. It’s a specific and interesting business model, as it has a presence in both the digital world and physical through its access to newsagents and tobacconists. That enables us to be extremely close to our retail customers.”
With so much innovation happening, and much of it in the B2C space before filtering through to the B2B arena, it can be challenging for corporate treasurers to keep abreast of all the many developments taking place – especially when they have many different priorities. As such, Bovero strongly advises treasurers to leverage the intelligence and expertise their banking partner(s) can provide.
He says: “For treasurers, it’s not only about finding the right solution but also the right partner to work with, help design and implement it. These days, it can seem as if there are as many payments propositions and product solutions for treasurers to choose from as there are models of cars.”
The evolution across the payments space is accelerating and, certainly for BNP Paribas, it is a priority to not only stay on top of all these developments but also play an active part in setting the agenda. Bovero concludes: “Our mission is to deliver novel, robust, and customised payments solutions – which have tangible benefits for our clients. But every client’s treasury is unique and our job is to understand their specific requirements and address their real needs, rather than deploying innovation for innovation’s sake. We do this through practical payments solutions which leverage the agility of a fintech, the experience and safety of an established bank, and best practice from across our global client base.”
Notes
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