“Europe’s payments infrastructure is world-class”

Whether people are receiving a salary, paying an electricity bill, shopping online or trading across borders, payments underpin everyday economic life. Yet the infrastructure behind them is largely invisible.  

Christof Hofmann heads Cash Management at Deutsche Bank, the business that helps companies and people move money reliably and efficiently across borders. In this interview, he explains why Europe is a global leader in payments infrastructure, where dependencies remain and what Europe needs to do now to build on its strengths.

That depends on which part of the payments chain you look at. In the underlying infrastructure, Europe is exceptionally strong. SEPA, SEPA Instant, Target2 and Euro1 allow money to move across borders quickly, reliably and at very low cost - in the case of SEPA Instant, even in real time. No other region in the world achieves this in this way. Europe has built a shared cross-border infrastructure that works extremely well. In this respect, Europe's payment infrastructure is world-class.

Since SEPA was introduced in 2008, banks and clearing systems have applied common principles and standards across 41 countries, supported by regulation. Today, companies and consumers can move money quickly, reliably and cost-effectively across borders. Few parts of Europe’s economy work as consistently across countries as payments. That reliability is often taken for granted but it gives Europe a real competitive advantage.

Few parts of Europe’s economy work as consistently across countries as payments. That reliability (…) gives Europe a real competitive advantage.

The challenge is less the movement of money in the background and more the way people and merchants pay in practice. At the point of sale and in e-commerce, many payment options are either national in scope or offered by global providers. At the same time, SEPA gives Europe a powerful common infrastructure on which to build additional competitive European alternatives for day-to-day payments.

The challenge is less the movement of money in the background and more the way people and merchants pay in practice

And rightly so. Wero is one such European solution, initially for online retail and later for in-store payments. It is also designed to work alongside other private-sector European initiatives so that different services can be used more widely across Europe. In future, the digital euro could complement these solutions as a form of digital cash.  

Together, these initiatives would give merchants and consumers more choice, while ensuring that Europe has its own widely usable options in a strategically important area: digital payments. That would strengthen resilience and give Europe more control over a key part of the economy.

For companies, the opportunity lies in more automated payments. Blockchain-based payments and stablecoins could become part of the next phase of digitalisation. They could also help ensure that the euro continues to play an important role in future global financial systems. Blockchain-based digital infrastructure can allow companies to automate processes more extensively than they do today. To do that, they need compatible payment solutions – systems that can trigger a payment automatically once agreed conditions are met, without a person having to initiate it each time.  

Yes. For Europe to build on its already strong role, it needs to keep the currency relevant and attractive in a changing financial system. That includes encouraging the use of the euro in international trade, including in the context of EU trade agreements with other economic areas. It also means ensuring that the euro can be used in modern payment systems and new technologies, including blockchain-based payments and digital forms of money.  If the euro is easy and attractive to use in both existing and emerging areas, it can further strengthen its international role.

Europe needs to support initiatives such as Wero and the digital euro in a coordinated way, while also leaving room for innovation. In more technologically demanding areas, such as blockchain-based payments, Europe needs to move beyond pilots faster. Financial institutions have to help drive that progress. But they also need clear signals from policymakers. Regulation is essential for legal certainty. But it should also strengthen Europe's competitiveness and set clear priorities.