Regulation holds back innovation, Stet warns
Regulatory initiatives are holding back innovation and allowing newcomers that don’t have to comply with them to enter the payments market more easily, said Jose Maria Beltran, Sepa development director at French payments processor Stet yesterday.
During the European Clearing: Evolution and Consolidation session, which examined the remaining challenges in meeting the European Commission mandated end date of 2014 for migration of domestic payments instruments to those compliant with the single euro payments area, Beltran said firms such as Google and others were now providing real competition that couldn’t be ignored. He also predicted more consolidation of traditional automated clearing houses.
With further regulations including Basel III on the way and intraday liquidity requirements mushrooming – not to mention the impending cash management changes that Target2 Securities will unleash – Beltran is convinced that the market will undergo more consolidation in the payments sector under these regulatory and market pressures. Stet’s new multiple clearing and settlement mechanism (CSM) architecture can cope with these pressures, he said, and cover the move from bilateral to multilateral clearing across many different countries. More national payment schemes would also outsource their operations, as Luxembourg and Finland have done, he maintained, “because banks and countries are now prepared to consider not running their own clearing and settlement mechanisms.”
Beltran’s point that old national payment infrastructures are breaking down and further consolidation is inevitable as fewer players fight for more volume, is perhaps borne out by VocaLink’s recent move. Just before the start of Sibos, the UK-based payments processor announced it would not focus on this white label market. Instead, the company will focus on immediate payments for future growth; even though it had previously won a contract to run Sweden’s ACH system. Let’s hope the consolidation happens fast enough to meet the rising challenge from newcomers to the market.
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