instant messages #20 by Marcus W. Mosen
Marcus W. Mosen comments on payment and banking topics on various portals and delights his followers on Twitter(@mwmosen) with pointed contributions on payment, fintech and politics. From now on you will find his monthly guest column “instant messages by…” on the latest happenings in payment, banking & co.
When we wake up in the morning these days, the first thing we no longer look at in the banking/payment/fintech bubble is what the journalists Dohms & Kirchner from Finanz-Szene have researched in the previous days, nor do the exclusive reports from Finance Forward sweep us off our feet. Now the first thing we do is look at the “breaking news” that the smartphone has received via pushmessages at night or – we older ones – turn on the TV to get an idea about the latest terrible news from the war in Ukraine. And we all can’t really grasp it yet…
Numerous new terms have been conveyed to us from politics and the media in recent days. Who, for example, could have said ad hoc what was meant by the word “peace dividend” when they first heard it? As is generally known, dividends are paid to shareholders when the company has generated profits. On the other hand, we took the peace dividend in the form of prosperity gains as a matter of course, since we believed that a defense army should at best only be used as emergency aid in the event of severe weather disasters. Deployments in countries such as Mali or, until recently, Afghanistan were generally understood as peacekeeping operations.
Now we are all awake! A wake-up call in many respects was certainly the special session of the German Bundestag on February 27, 2022 – on a Sunday, when it is actually parliamentary weekend. On that day, Chancellor Olaf Scholz announced that a special fund of 100 billion euros would be created in the 2022 federal budget to boost the ailing Bundeswehr. Hand on heart: one or the other payment strategist in the German banking industry will have had a brief flash of thought run through their body when they heard this speech.
Because only a few weeks ago, the wires between the banking associations, banks and savings banks were glowing with the Federal Ministry of Finance or the Bundesbank, with the aim of obtaining a subsidy for what was until recently the most important European payment traffic project “EPI” (European Payment Initiative). However, as we then learned from a Handelsblatt article on February 9, Finance Minister Christian Lindner had clearly rejected this wish. Even from today’s perspective – which, against the backdrop of Putin’s war of aggression, certainly puts the state’s allocation of money in a different light – this decision is only logical. After all, in the many speeches, articles, and commentaries heard and read by EPI initiators over the past two years, it has been emphasized time and again that the “fight” is for the customer interface or for an alternative to the international schemes. However, ensuring customer relationships in the banking business or generating new business is not really the task of the state and thus the taxpayer.
One thing the war in Ukraine has already made clear to us: Payment communication services such as SWIFT or payment infrastructures such as those operated by Mastercard or VISA are a sharp sword for sanctions. At the same time, they also ensure transparency and support democratization. Now some may wonder why digital payment supports democratization. In a country like Russia, the sanction of suspending these payment methods also helps the people realize that their president is hoodwinking them. In many countries, cash is still the far dominant form of payment – with all the side effects such as corruption or money laundering. The penetration of a country with digital payment solutions therefore has a democratizing and thus social aspect in addition to the economic aspects.
But let’s go back to the last day, when we could all still live off the peace dividend and the term “turn of the times” did not yet play a role. On February 23, Messrs. Dohms & Kirchner made headlines in the morning with the headline: “EPI Facing End After Geno Withdrawal”. For us payment insiders, this news didn’t necessarily set our pulse racing straight to 180, as the comrades’ decision had been pending for some time. But it was a little surprising after all. And from today’s perspective, all (former) EPI decision-makers must ask themselves whether this decision was wise.
According to external observers, this cannot really have been due to the financial capabilities of the institutions that have declared their “EPI exit. After all, in recent years the institutions of the German banking industry have generated special income from the sale of legacy payment companies, among other things, which they actually wanted to invest in payment innovation. And with a pre-tax result of 3.1 billion euros at DZ Bank, something could theoretically have been budgeted for EPI in the 2022 budget. The question therefore arises as to what the “other” reasons were for the negative vote against EPI, apart from the business reasons that are always emphasized. Was it because the P2P solution favored as the first product would not have been “breaking news”? Or were there really too many supporters of the good old Girocard, who with stoic composure propagated it as the platform core of EPI? In fact, all (payment) strategists should have learned in recent years that there is nothing to be gained by going it alone in this day and age. But ultimately, who knows what led to the status quo at EPI? And in the end, it’s in the past now anyway.
Since February 24, we have arrived in a new, definitely not better world. Political leaders now have their hands full working to restore peace and deal with the aftermath of this war. Many international companies have declared their willingness to support the sanctions against the Putin regime in recent days – including Mastercard and Visa.
But perhaps this is also a good time for the various players in European banking and payments to rethink truly European solutions. At EPI, the negative decisions were possibly due to the previous concepts, which were still too much in line with the old payment world. Or perhaps it was because the addition of the word “interim company” was already a metaphorical manifestation of dithering and hesitation. After this “change of epoch”, there is an opportunity to take another look at ourselves and ask how we can strengthen Europe, which has never been so united, and make it more innovative with European banking and payment services. And one thing should have become clear to us once again in the last few days: a connection to or cooperation with the American offers and platforms should not be ruled out when rethinking.
Let us hope that this war and the suffering that goes with it will come to an end as soon as possible and that we will be able to deal with our banking and payment issues again in the not too distant future instead of powerlessly witnessing the aggression of an incalculable Russian president.