Survival in a time of change

Same same but different – in 2023, the abundance of challenges in payments remains equally enormous. What makes the situation even more difficult, however, is the impression that procrastination effects seem to be spreading on the bank side. Important issues are simply not being addressed. This applies both to the implementation of upcoming mandatory tasks and to the exploitation of business opportunities that arise.

The most underestimated mandatory task for 2023 is the implementation of the inconspicuous EU Directive 2020/284 "as regards introducing certain requirements for payment service providers". The directive on the prevention of fiscal fraud in cross-border e-commerce for goods and services requires payment service providers to report certain payment data. The details are quite complex: an additional, rather intricate reporting system with its own interfaces to the Federal Central Tax Office has to be set up. Data not previously available must be collected and reported: for example, the identifier of the payment recipient's location, such as the IBAN. If available, the address data and tax numbers of the payment recipient must be transmitted. The reporting obligation applies from 1 January 2024. The number of banks that have set up such projects is very limited to date. Considering that financial authorities are not exactly known for their sense of humour, this seems rather bold.

SWIFT requires structured data
Not quite as urgent, but similarly complex, is the SWIFT requirement to process only structured address data of customers in payments from November 2025. The regulation affects banks as well as end customers. It implements requirements of the leading industrialised countries to combat embargo violations, terrorist financing and money laundering. It is recommended to switch to using only the structured data as early as 2023. This will likely affect several million data records in Germany alone which are not available in this form. Banks should therefore already develop communication plans and technical implementation scenarios in the coming year – with AI support where applicable.

It is a sad but industry-accepted truth that 50 per cent of payments operating costs are for regulatory compliance and another 25 per cent for process and technical infrastructure maintenance and adaptations. It is therefore not surprising that financial institutions often lose sight of earnings potential and opportunities.

Request to Pay provides opportunities
For example, an offer that combines the still young standard Request to Pay with concrete use cases such as electronic invoices has enormous potential for banks. If banks were to offer their corporate customers the processing and handling of electronic invoices and the corresponding payment requests, they could reduce their costs – including the reconciliation of incoming payments – by around ten euros per invoice. In this context, banks could generate lucrative transaction fees, while at the same time further strengthening the business account as core of the customer relationship and, on top of that, make a significant contribution to sustainability.

The decisive success factor for corresponding services is cross-bank accessibility. It is therefore all the more gratifying that such infrastructures are already emerging in the market. It is expected that from 2026 onwards, only electronic invoices will be permitted throughout Europe anyway.

TARGET2 consolidation: "all hands on deck"
So much for the underestimated topics. Not underestimated are the preparations for the TARGET2 consolidation, which has been postponed to 20 March 2023, and the start of the SWIFT migration to the ISO 20022 format. This date should remain fixed, because another postponement of the TARGET2 consolidation would probably have the nasty consequence that TARGET2 and the SWIFT migration would diverge.

Mass payments will also be characterised by the implementation of new regulations in 2023, such as the EU regulation on the mandatory introduction of SEPA instant payments and the introduction of the latest ISO standard for all SEPA payment schemes. The latter will not only have an impact on the payment file and payments systems themselves, but will also affect peripheral systems like, for example, master data systems.

Fraud prevention for real-time credit transfers
The EU Commission's proposal for the mandatory introduction of SEPA real-time credit transfers presented at the end of October 2022 is currently the subject of in-depth discussions and lobbying. Among other things, there is intensive discussion on whether payment service providers must offer their customers a matching of account number and name. The background to the proposal is the finality of SEPA real-time credit transfers in seconds. This makes them vulnerable to fraud and is to be counteracted by the possibility of checking whether the IBAN in question really belongs to the payment recipient before the payment is sent out. Successfully combating fraud attempts is becoming a key factor in the success of instant payments.

The widespread establishment of real-time credit transfers does not only affect payment service providers who have not yet offered the instrument, but also the active players. The reason: since real-time credit transfers must not be more expensive than conventional transactions in the future, market participants expect their share of all transfers to rise from 10 to at least 30 to 40 per cent. This trend is promoted by the rising interest rate level, which rewards the holding of credit balances again. But if the number of transactions grows by at least a factor of three, all the payment service providers whose real-time infrastructure has so far been based on makeshift solutions will run into difficulties. A corresponding check is therefore urgently required.

In retail payments, the pan-European initiative EPI – with a meanwhile limited scope of services as an account-based P2P and e-commerce procedure – faces important fundamental decisions at the turn of the year 2022/23. This concerns, for example, the questions of whether the cooperative finance group will rejoin the EPI and whether and how the initiative as a whole will move forward.

New use cases for retail payments
The key service providers in the retail payments sector will continue to work on improving their capabilities in 2023. The issuers will, for example, further develop the girocard for e-commerce. Many payment service providers are working on supporting various omnichannel concepts, not least as a result of the Corona pandemic. The focus here is not only on the now generally known use cases such as click & collect, but also on

  • The use of online payment methods at the point of sale, such as buy now, pay later,
  • The support of franchising and cooperation models, for example cross-channel and cross-company returns, and
  • The evaluation of customer behaviour across the various touchpoints.


In October 2023, the ECB's analysis phase on the digital euro will end and the Governing Council will likely decide to start the realisation phase. Since the digital euro is currently being designed as a retail euro, various banks in Europe are already working in parallel on the introduction of so-called tokenised commercial bank money in 2023.

How can the financial institutions – in view of the shortage of skilled workers as well – cope with the enormous number of tasks? It will only work if the willingness to cooperate across banks increases, standard solutions become more widespread and outsourcing is also considered. There should also be a growing willingness to renew the foundations, if necessary, instead of continuing to build on existing legacy systems while ignoring the "technical debt".

Those are a lot of projects to cover already – and we have not even talked about the impact of the coming DORA regulation, accessibility regulations and the PSD3 looming on the horizon.

Author: Hubertus von Poser, Head of Consulting Payments, PPI AG

Stablecoins blog post series – part 1: background

If you deal with the subject of cryptocurrencies, you will inevitably stumble across the topic of stablecoins, and the question of what exactly stablecoins are quickly arises. In this series of blog posts, we want to take you on a brief, condensed journey through this topic.

A stablecoin is a cryptocurrency that is stable to a certain base currency. The most common use case is in the area of crypto trading because the (cross-border) clearing between crypto exchanges can be processed faster with stablecoins than via the classic payment channels. In addition, they are becoming increasingly popular in emerging and developing countries due to their stability of value compared to local currencies.

In short, the benefits of a stablecoin can be summed up in four main points:

  • Value reference and medium of exchange for trade
  • Protection against exchange rate fluctuations
  • Generating interest income in the area of decentralised finance
  • Fast and limitless payments

Algorithmic vs. collateralised stablecoins
There are two different types of stablecoins: collateralised stablecoins and algorithmic stablecoins:

In the case of collateralised stablecoins backed by USD, the company behind the stablecoin deposits USD in a bank and issues its stablecoin. The aim is to achieve 1:1 cover. In the case of algorithmic stablecoins, only an algorithm tries to keep the exchange rate between the stablecoin and the underlying asset (e.g. USD) constant.
After the collapse of the algorithmic stablecoin "TerraUSD" in May 2022, there is only one really significant algorithmic stablecoin left: MakerDao's "DAI".

Collateralised stablecoins are usually issued by crypto exchanges. The biggest stablecoins sorted by market capitalisation are Tether, USD Coin and Binance USD. Together, they reach a total market capitalisation of around USD 130 billion (as of Nov. 2022).

Stablecoins digitally represent the value of an underlying asset on a 1:1 basis and are considered digital money. They are often covered by USD bank deposits, US government bonds or other securities. If one remembers the so-called gold standard, it is easy to recognises quite intentional parallels here.

Advantages compared to classic payments
The advantages over classic payment systems are that stablecoins are accessible to everyone worldwide and around the clock. The transaction fees are low, and cross-border payments can be made quickly and easily. A credit transfer is also possible without KYC and without the involvement of a bank. All that is needed is a smartphone with an Internet connection and a digital wallet of the currency.

As mentioned at the beginning of our article, in addition to crypto exchange traders, more and more people from emerging and developing countries have a particular interest in stablecoins.

Many emerging and developing countries are struggling with high double-digit inflation rates. The own national currencies continue to lose value against the US dollar. This also affects the trust of the citizens in the respective countries. In the recent past, many of these countries experienced a so-called "bank run".
A bank run or banking storm occurs when investors want to withdraw their deposits from their banks as soon as possible. If several or all banks within a market economy are affected, this is referred to as a banking storm or banking panic.
Governments were therefore forced to close local banks. For local citizens in such a situation, stablecoins can become an attractive alternative to their domestic currency to protect themselves from financial impasses.

In various situations, stablecoins can therefore be a practical solution to problems that cannot be solved or can only be solved poorly in the FIAT system, or may even be a way out for citizens in times of economic difficulties. However, where there is light, there is also shadow. And we want to look at that with you in part 2 of our series.

Authors: Philipp Uhinck, Benjamin Schreck