Payment cards are a very popular way of paying retailers. They are increasingly replacing cheques and cash. To accept card payments in a shop, merchants need to have an agreement with an acquiring entity. The acquirer processes card payments on behalf of the merchant: it handles the information on the payment and cardholder and forwards it to the cardholder’s payment service provider via a clearing infrastructure.
SEPA will bring harmonisation and will increase competition among the providers of card payment services. This means more choice, lower costs and better service.
With SEPA, acquirers will be able to process all SEPA-compliant card payments – including across national borders. Therefore, merchants will be able to choose any acquirer in SEPA. This will increase competition among acquirers and bring down costs.
Point-of-sale terminals will become increasingly standardised with SEPA. As a result, their production and certification costs will diminish and competition among providers will increase. All this should bring fees down for merchants. In addition, merchants will be able to accept a wider range of cards from a single terminal. The increased competition among card schemes should also drive down the cost for merchants.
Merchants with a remote customer base often do business via e-commerce, mail or telephone orders. These channels are used for offers and orders, but also for submitting invoices and sometimes even for directly initiating payments. In SEPA, these merchants need no longer worry about varying payment instruments when operating in different countries. They benefit from the harmonised cards market, but can also use SEPA credit transfers and SEPA direct debits as payment options. This may be particularly beneficial for them if a variety of eSEPA services also evolves, tailored to their specific distribution channels.
Improvements in the security of cards and the underlying payment infrastructure are the main reason that fraud at automated teller machines and point-of-sale terminals was lower in 2010 than in 2007. The most important enhancement was the wider adoption of EMV, a chip-based standard. This offers stronger security features than conventional magnetic stripes both for the physical card (since, unlike the stripes, the chip cannot easily be duplicated) and for the technological infrastructure behind the transaction. The adoption of these safety features is recommended by the ECB and forms part of the SEPA migration (press release).