The digital euro. The European Payments Initiative (EPI)/wero. Regional mobile payment interoperability initiatives. Request-to-pay. The SEPA Payment Account Access (SPAA) scheme.
There is certainly no shortage of emerging pan-European payment initiatives currently vying for both banks’ attention and budgets. This is in addition to the broader evolving payments compliance and regulatory requirements that banks need to stay on top of – including, for example, the new Instant Payments Regulations.
So, just where should banks best direct their focus and investment if they want to deliver better payment propositions to their customers, while supporting regulatory expectations and achieving good commercial outcomes?
How can existing investments — in particular those made to enable PSD2 Open Banking technologies — be best leveraged?
At Token.io, we believe that banks that choose to implement support for the new European Payments Council SPAA scheme have the potential to achieve compelling outcomes on all these fronts.
What is SPAA?
The SEPA Payment Account Access (SPAA) scheme covers the set of rules, practices and standards that will allow banks to offer and monetise premium APIs that go beyond PSD2 API functionality.
As such, SPAA supports a very rich set of enhanced Open Banking functionality, including — crucially — Dynamic Recurring Payments (DRPs). From utility bills, to subscriptions and ecommerce payments, DRPs enable consumers to make frictionless one-click payments or recurring A2A payments with a single consent. Our engagement with merchants and PSPs indicates there is very strong demand for a payment mechanism such as DRP.
The development of SPAA has been supported by the European Payments Council (EPC), who have a clear track record in developing widely used pan-European payment schemes (such as SCT, SDD, and SCT Inst). Using their convening powers, the EPC brought together banks and fintechs to jointly work on the details of the SPAA scheme.
SPAA is also endorsed by policymakers such as the European Central Bank and European Commission, having had its genesis in the European Retail Payments Board (ERPB).
Why SPAA and why now?
SPAA is ready to go now. The SPAA scheme has a final rulebook, a commercial model, and is already supported by technical standardisation initiatives, such as the Berlin Group’s openFinance API framework. Other pan-European initiatives are still earlier in their development (e.g. wero) or are still awaiting final go/no-go decisions (e.g. digital euro).
Token.io’s chief product officer Charles Damen
Of the many initiatives at play, SPAA has the potential to start delivering new revenue streams and new A2A payment functionality to banks in the shortest time frame.
SPAA is built upon the same frameworks and technologies that banks have had to implement to support PSD2. For example, SPAA leverages the same trust framework (eIDAS) and open API technologies as PSD2. It’s also based on instant payments, which regulation mandates eurozone banks support by 2025.
As such, the incremental investment required to support SPAA relative to other initiatives – which use different technical/operational stacks – is considerably less. Therefore, there is a broad set of financial institutions that could potentially support SPAA with relative ease.
SPAA’s premium API scheme is a major revenue opportunity for banks
Finally, SPAA has the potential to both complement and enhance other nascent pan-European payment initiatives. SPAA is the only pan-European initiative to have defined the rich functionality of Dynamic Recurring Payments. Other initiatives could leverage this functionality by using SPAA as an additional layer of enabling “rail” underlying their propositions.
For example, just as EPI will utilise SEPA’s SCT Inst scheme to clear and settle underlying payments made using the wero wallet, SPAA’s DRP API functionality could also be integrated into the wero wallet to enable this recurring payment functionality across all A2A payment methods.
Piero Cipollone, a member of the executive board of the European Central Bank, recently gave a strong endorsement of the SPAA scheme, noting “[O]ngoing initiatives such as the SEPA Payment Account Access (SPAA) scheme contribute to enhancing independence and innovation. […] SPAA-based payment solutions can provide a variety of account-to-account payment options as an alternative to cards at the point of interaction.”
“The ECB welcomes this innovative European road to ‘open banking’ and encourages market players to join the scheme,” he added.
Given the potential for enhanced payment propositions and commercial opportunities, it is clear that the case for SPAA is not only compelling but also imperative for banks looking to generate additional revenue streams in today’s rapidly evolving payments landscape.
As a leading A2A payment infrastructure provider, and as one of the earliest participants in SPAA, we clearly see the commercial potential for banks and the end user benefits of this scheme — and we stand ready to work with banks across Europe to unlock these. Together, let’s realise the vision of a homegrown pan-European payments initiative.
Charles Damen is chief product officer at Token.io
