2016-06-28
Payments market development goal: instant payments, stronger competition and greater user involvement
In the next four years, new contactless, instant and closely-integrated into business models payment methods should be made available to Lithuanian residents and widely used. Such an ambitious payments market development goal is established in the draft National Payments Strategy. It has been prepared by the Bank of Lithuania and submitted for public consultation with market participants and the public.
‘Our goal is for the new, convenient, innovative and reliable payment methods, which, amid the implementation of modern technologies, are rapidly making their way through Europe, to reach Lithuanian residents and businesses quicker. Sadly, over the last decade, trends unfavourable to payment service users emerged in our payments market. Together with market participants, we could direct them to a path more convenient to the public by accepting and implementing the National Payments Strategy. Hence we seek both coming together of all parties and persons interested, their close cooperation and a breakthrough in this area’, said Marius Jurgilas, Member of the Board of the Bank of Lithuania.
The draft National Payments Strategy is threefold. Its first direction — a developed infrastructure, allowing the extensive use of contactless and instant payments. Instant payments are instant electronic payments available any day (including weekends and holidays) at any time of the day; funds are immediately credited into the payee’s account and within a few seconds following the payment initiation the payer receives a notification about it.
‘The developed retail payment system, managed by the Bank of Lithuania, will provide favourable conditions to execute instant payments as well as enhance the variety of other payment services. It will have new functions, including the possibility to execute payments among the accounts of the customers of the participants. We hope that the additional functions will not only engage current system participants but also attract new ones, encouraging greater competition, which is always beneficial for consumers. We invite current and future payment service providers to cooperate in renewing and enhancing the functionality of our payment system’, said Marius Jurgilas.
According to him, payment service providers will be able to express their support for the initiative and their wish to participate in its implementation by signing the memorandum of understanding on the enhancement of the functionality of the Bank of Lithuania retail payment system, prepared by the Bank of Lithuania.
The second direction of the Strategy is the expansion of payment service user involvement. A Payments Council could be created for this purpose, which would allow users, payment service providers and other parties interested, sitting at one table, to express their expectations and solve problems related to payment services offered in the market.
‘The Payments Council could also be a place, where an agreement on the standardisation of payment services could be reached. Namely the application of one standard encourages payment service providers to compete in terms of price, ensures a ‘one stop shop’ principle for the users and, as a result, contributes to a competitive and efficient payments market,’ said Marius Jurgilas.
According to his assessment, a perfect example of standardisation is the creation of the single standard for utility payments made using internet banking that is harmonised with SEPA requirement; not only payment service providers but users as well contributed to its development. This standard has already been approved by the Lithuanian Standards Board, and we believe that it will be widely used in the market.
The third direction is to build the payments service user trust in electronic payments and encourage using them. This goal might be achieved by educating the public. In promoting new habits, it is important to ensure that children would be introduced to non-cash payment means from an early age. Thus the Strategy suggests the possibility to also use non-cash payment means for payment at schools.
It is expected that the measures proposed in the Strategy will encourage Lithuanian residents to pay by using electronic means and the number of electronic payment transactions per capita will more than double — from 145 operations (in 2015) to 300 operations (in 2020). Features of the payments market, typical of countries that reached or exceeded the 300 transactions limit, are sought to be introduced in Lithuania. This encompasses the development of basic payment services, attention to the needs of the national market, implementation of innovations at the right time, competitive service pricing, user involvement in the development of services, etc.
The public and all parties interested are welcome to express their opinions on the draft National Payments Strategy until 30 September 2016. The document and questions for public consultation are available here (679 KB download icon).