ECB Director: Blockchain will disrupt the payment landscape

Rage Comment : Like most mainstream financial professionals, the directors of the European Central Bank also hope that blockchain technology can be combined with traditional financial technology rather than a complete revolution. After all, traditional financial institutions have invested too much in infrastructure, and various card payment systems rely on a huge hardware foundation. Blockchain can help achieve instant and extremely low-cost payment processes. However, as mobile devices become more and more advanced, how long can card payments last? Will they be completely replaced by mobile payments? This may be the most serious challenge facing card payments.

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European Central Bank (ECB) executive board director Yves Mersch said emerging payment technologies such as blockchain have the potential to disrupt card-based payment systems.

Mersch made the comments at a French banking conference in Paris on January 18 this year, where he gave a speech titled: "Card payments in Europe - latest trends and challenges."

When discussing the rise of new payment technologies, including distributed ledger technology, the banker predicted

“In the coming years, new technologies are likely to have an impact on payment behaviour, card usage and other traditional payment instruments.”

Innovative card payment services “displace cash payments and have the potential to further increase the use of card payments,” he said, but warned:

“The card payment industry will face strong challenges from innovative payment services whose payment instruments are based on non-card payment models.”

Reforming the card payments industry

Mersch mentioned instant payments as one of the challenges for card payment providers, explaining that the European Central Bank created the Euro Retail Payments Committee to develop an instant payment mechanism based on the SEPA (Single Euro Payments Area) credit transfer system.

He predicted that distributed ledger technology could have a “profound impact on the entire financial ecosystem,” while disrupting “traditional” payment instruments, payment services and payment processing industries.

More choice for consumers and businesses is a good thing, he said, adding that the new payment methods are safe, efficient and all providers "play by the same rules".

Yves Mersch, ECB Director

But according to the ECB director, there is "huge" potential for growth in card payments within the EU, provided instantaneous payment systems are achieved, "and a harmonious, competitive and innovative European card payments area is established through standardisation, strong interoperability and appropriate security measures".

However, he reminded the banking industry that the above innovative payment services will bring challenges to the card payment industry. Competition will come from instant payment services for credit transfers based on SEPA, payment services in the e-commerce field, and distributed ledger technology.

Mersch concluded:

“We welcome this competition, where various solution providers provide safe and efficient services to the market under the same rules. I believe the card payment industry will find the right way to face these challenges - and users will benefit in the process.