MERCHANTS

Michael Salmony 0:12

Hello, my name is Michael Salmony and I'd like to welcome you to another episode of the Payments Trilogue, where this time we don't only talk amongst us payment geeks between the banks and the fintechs, we're actually talking to somebody who uses the payments that we're carefully constructing, and that is Atze Faas from EuroCommerce. Welcome Atze, maybe you could tell us a little bit about yourself and which organization you represent.

Atze Faas 0:36

Thank you very much. Pleasure to be here. So quick introduction of myself. I worked for BP, the big oil company for 30 something years. And the last 10 years of that were ⁓ in payments, European responsibility for the cards acceptance. So we did things like terminal replacement programs, acquire negotiations, scheme settlement negotiations.

Javier 0:37

you

Okay.

Atze Faas 1:05

So the business side of things. And then in early 22, I joined EuroCommerce as the payments advisor. EuroCommerce is the trade federation for retail and wholesale, representing both the big brands like IKEA, Carrefour, H&M as well as around 5 million or so ⁓ SME retailers. So quite a variety in our membership.

Now EuroCommerce has been historically always quite active in the field of payments from the merchant associations. I think we're the only one who has a dedicated resource this time in my person looking after payments. And I think the very first ⁓ activity that I found in the archives dates back to 1997, where we first started complaining to the commission around Visa and MasterCard. It just shows you.

Javier 1:44

Okay.

Atze Faas 2:01

you know, how that is an area of focus. So my work is mainly three blocks. It's around payment costs and includes the cost of cash. I wasn't responsible for cash in BP. The second block is around, you know, what's happening right now in terms of regulation, legislation. And the third block is sort of more forward looking things like digital euro or indeed instant payments at the point of interaction ⁓ and that kind of thing.

Javier 2:11

.

Atze Faas 2:27

What I also done in the early stages is form what we call a merchant payments coalition together with

other merchant associations, you know, from the airlines, from the online retailers, from independent retailers, SME United is in there. And ⁓ recently we added the European Association of Corporate Treasurers to it. So it's just an effort to bring the merchant ⁓ perspective

voice, stronger in the room. I felt that the banks, the PSPs, the consumers are all pretty well organized, have a good lobby, but on the merchant side that was quite a bit weaker and we're ⁓ attempting to, let's say, strengthen that.

Michael Salmony 3:12

That's very impressive. I mean, you've put an amazing organization together and it's good to get the merchant voice because I also get the impression it's a lot is just talked amongst the one side of the industry. You mentioned the digital euro. I think you're one of the only people who actually like the digital euro.

Atze Faas 3:29

Indeed, it's sort of, you know, carefully phrased, we see the potential of the digital euro, the potential ⁓ to lower the average cost of payments, which only has gone up in recent years, you know, the increased popularity of e-commerce, especially as a result of COVID, the increasing popularity of PayPal, Buy Now Pay later.

Javier 3:31

you

Atze Faas 3:55

those are all payment methods which are more expensive, let's say, than the average. So you saw that average creeping up. And we look at the digital euro as a way to lower that average. It's not to replace everything, but just to balance it more out. I would also say, we've seen scheme fees creeping up after IFR. So we are worried about that trend.

Javier 4:00

.

Atze Faas 4:22

And this is why we see the digital euro there. But it's not only about cost. We also see the digital euro as a way for more ⁓ European autonomy, resilience, especially relevant these days, but also as a way to ⁓ innovate ⁓ and more on a European scale.

Javier 4:26

Okay.

So,

Atze Faas 4:43

Having said that, we are calling on the ECB to let's say keep it simple in the first instance. I have said to them and I'll repeat it here, we should ⁓ work on getting the 80 % use cases, the buy now pay now, one off payments

Javier 4:45

thank

Atze Faas 5:04

done ⁓ first and worry about all the bells and whistles, the recurring payments, the conditional payments, the offline payments.

a little bit later on in terms of resilience for consumers to be able to buy their daily groceries, fuel their cars, get their medicine, use public transport. That is the key thing to have ⁓ available first.

Ralf Ohlhausen 5:29

Could I jump in here and nail you down on the cost thing there for the digital euro because you came out with this, well, let's say controversial paper suggesting that it should be free, not just to consumers, but also to merchants. Can you explain that?

Javier 5:35

you

Atze Faas 5:39

Provocative, I hope.

No,

we've not set free. We've set a couple of things. So first of all, we are saying ⁓ both cash and digital euro, which is the digital form of cash, are different animals than, you know, private payment means there is this mandatory acceptance side of it. It's public money. There's no liability on the issuer, at least on the private intermediaries. So we're saying that

Logically, the cost should be coming in quite low. We are prepared, of course, to pay our providers, let's say, the acquiring side of Digital Euro for their services, like we do for cash handling, like we do for Visa MasterCard transactions, and so on. What we are worried about, and we think it's illogical to compensate the issuing side of it. That's not happening in cash.

Javier 6:31

Okay.

Atze Faas 6:42

Why should it happen in digital euro? Especially because intermediaries don't have a counterparty risk there. we are saying having a inter-PSP fee will make it overly complex. You are effectively replicating the card interchange plus plus

kind of system with all those money flows that need to be managed. Again, there is a fee imposed on merchants where we have no influence ⁓ on like we have with interchange and

scheme fees. And you know, if you look at the language of the proposed regulation, it says ⁓ the legal tender status means mandatory acceptance and ⁓ at full face value. So if the consumers are getting full face value, why aren't the merchants getting that too?

Javier 7:16

Okay.

Michael Salmony 7:31

But looking

Javier 7:32

But.

Michael Salmony 7:32

beyond the digital euro, can you tell us a little bit about the sort of account to account payment systems? I know Ralf is super interested in that. What your view is on those?

Atze Faas 7:44

So we're quite keen to see those flourish. We have ⁓ quite high hopes, hopefully helping to lower the average cost of payments. But you see this fragmented landscape and listening to previous editions of the podcast, you hear that too. So in Europe, it's great that we have so much competition and we have so much creativity, but it leads to ⁓ fragmentation. And I think to...

Javier 7:58

Okay.

Atze Faas 8:13

a certain extent, we're fighting ourselves rather

than creating a European winner or winners that would bring ⁓ Europe ⁓ forward. we're calling... Sorry?

Javier 8:23

Okay.

Ralf Ohlhausen 8:25

Would you have a favorite? Would you have

a favorite out of the ones you know, yeah, we talked a lot about retail payments and the various ways and especially account to account. So EMPSA, EPI, well, your open banking and what's your favorite beast?

Atze Faas 8:36

SPAA.

Well, that's a hard one. You know, in an ideal world, I would say let's have the open standards of SPAA and EPC QR codes ⁓ and so on. Let's have the, let's say the backing and the centralized approach of ⁓ EPI. And let's have the consumer base that the EMPSA members have. If we would throw those together.

Javier 8:47

.

Atze Faas 9:03

And add in just as a flavor also a public payment means CBDCs, whether digital euro, digital pound, digital zloti, digital krone. ⁓ I don't care. That would be my ideal world. you know, it was interesting that Cipollone in a call and I think even publicly says, well, actually the digital euro consists of three pieces. One is the legislation. Second is the infrastructure. And third is the product, the proposition, if you will. And we are saying, OK, this

Javier 9:20

.

Atze Faas 9:33

infrastructure piece, the middle piece, is a great idea. Let's build like a European road system. He even calls it a railroad, I think, where everybody can travel on, open, standardized, easy to integrate, easy for consumers to understand. And that will yield all those, you know, network effects, economies of scale, but still leaves open plenty of competitive space.

Javier 9:49

Okay.

Atze Faas 10:02

for let's say a brown vehicle, a big vehicle, ⁓ a two wheel vehicle to drive that road. And ⁓ that would even, I think, bring Europe in a space where that could be used elsewhere across the

Ralf Ohlhausen 10:18

Well, I'm biased

Atze Faas 10:19

globe. Yeah.

Ralf Ohlhausen 10:19

on this obviously, but don't you think that we've just spent what is it five, seven years and billions on building that infrastructure. It's called a PSD2 API's and all the connectivity that we have there. So this is the one thing that we have. And if anyone

Javier 10:22

.

Ralf Ohlhausen 10:38

turns off ⁓ other electronic payment methods tomorrow or loads them with a high tariff that the only one electronic alternative that we have to reach everyone in Europe is through open banking. so it's also from a merchant's perspective, if you want to reach people electronically there you have and of course, it should not just be a fallback, it should or could be the basis for all of this.

Javier 10:52

Okay.

Atze Faas 11:04

I think that's the key. We're working very hard in various ways to make sure that consumers understand it and actually use

it. ⁓ I think there's a missing piece there on facilitating account-to-account payments at the point of interaction because of this fragmentation that I mentioned earlier.

Javier 11:16

Okay.

Atze Faas 11:29

And in this PSMEG subworking group, Ralf, that you and I are working in, we are talking about, ok so should we have a way for consumers to recognize, OK, I can use my account-to-account-based solution here through a symbol, much like the contactless logo or something similar, that simply signifies, OK, ⁓ consumers need a little bit of, I think, education here.

Javier 11:49

So, thank

Atze Faas 11:57

Also in the current context of European independence and keeping your data in ⁓ Europe, there are ⁓ propositions like accounts, like the PSD2 ⁓ PISP, but also EMPSA, EPI

for all, care, that are using that and are based on that. ⁓ But I think the biggest issue will be like with digital euro,

How do we get consumers to understand the benefits of it? Why should I use it? And for merchants to have an easy way to offer it.

Michael Salmony 12:39

That's for sure. Another hot topic I know you have is the surcharging ban. Can you tell us a little bit about that?

Atze Faas 12:48

Right, surcharging for payments is something that we would ⁓ favor, ⁓ but there's always a but. So why do we do that? So first of all, we think there's this misconception that we have let ⁓ start in the consumer minds, including myself, that payments are for free. They're not.

Javier 12:53

Okay.

Atze Faas 13:16

Payments are costing something, cash payments, whatever, ⁓ on the consumer side as well as on the merchant side. So the question is ⁓ who will pay for it? And I think, you know, in the end the consumer always pays. But the problem is, you know, do you do that directly? You know, charging, letting the consumer know,

Javier 13:25

Okay.

Atze Faas 13:41

okay, this is the consequence of your choice.

Once I inform you what the choice is, you can make a conscious decision. Indirectly, merchants pay for it somehow and put it in their sales prices. They have to recover those costs, of course. Or even more indirectly, have the taxpayer pay for it through, let's say, in the case of the digital euro. That could be ⁓ an option. Now, why is it important? I mentioned this creeping...

⁓ increase of the average cost of payments and the moment you sort of blur that picture by putting in an average amount of you know all the different payment methods costs, the weighted average, you are effectively ⁓ inviting consumers who pay with a relatively cheap payment method to sponsor, to subsidize those that are using Buy Now Pay Later.

Javier 14:17

.

Atze Faas 14:42

And you may have seen that example that we use, know, taking a washing machine of 600 euros that would be costing 595 if you pay, let's say, with a domestic scheme, even with cash, but would cost 620, 618 to be exact, if you would pay with buy now, pay later. So how is it fair to do that? And how is this, you know, helping keeping consumer prices low?

Javier 14:52

So, thank

Atze Faas 15:13

And the second area is more around

the right to surcharge. We call it the right to surcharge. Whether we use that right is a different conversation. I know some of my members hesitate to use it. Supermarkets, don't... The speed and the convenience, lots of traffic, they don't want to have a discussion at the till. Well, actually, now you're using ⁓ AMEX, you should pay a surcharge. ⁓

Javier 15:38

Okay.

Atze Faas 15:41

Now you're using Girocards we'll give you a discount. So those are hard conversations to have and cause a lot of friction. And the other thing, know, the right to surcharge ⁓ should come with some boundary conditions like you've seen in Australia and actually already in the text of PSR article 28.5 if you want to be

exact that says you shall not surcharge excessively.

Michael Salmony 16:05

I'm

Javier 16:08

Okay.

Atze Faas 16:10

And we are all for that. It's just a way of showing consumers where the costs are. And if they make the conscious

decision to do that, then fine. Another guardrail would be no blended surcharging because then you lose the effect of it. And the other guardrail would be there has to be at least one digital payment method without a surcharge. We think that's quite fair.

And it will help financial literacy, it helps consumers finally understand bit more the consequences of their choices. Whether in the end it will lead to a reduction of prices and not cause too much friction is to be seen. If you ask me honestly, it will be difficult to get rid of all surcharging bans in particular because some member states, I think around 16 of them,

Javier 16:39

.

Atze Faas 17:04

have ⁓ exercised their right to impose a complete surcharging ban in their member state. And I am not soon seeing them giving up that. But in economic theory context, the way you can ⁓ influence consumer behavior and show true value cost, it would be fair to have surcharging allowed.

Michael Salmony 17:28

Yeah,

I'm very much on your side of the argument. I mean, if you make it transparent, which payment instruments are expensive and you may allow the consumer to choose and you get more transparency. hear Javier doesn't quite agree with that.

Javier 17:33

No,

no, well, it's not theoretically I could agree or conceptually, but I think it's the nuances are more detailed, I would say. So when coming to the concept of costs, the problem is those who are invisible, those who nobody knows who is paying. And I think Atze was

right when pointing that at the end of the day, there are only two people paying either the consumer or the taxpayer, no other, no other, even merchants in this regard, they are just intermediaries. It's the consumer or the taxpayer. And the problem with, with the payment instruments is that in many cases there are invisible costs, which are not easy to assign to any party. And eventually it will be paid by a taxpayer or a consumer, but nobody knows what. And the problem is

that if you take each payment instrument by its merit, it will be very difficult to assign the different costs. So we have to reach a basic understanding to make it viable. Because the other thing in which I agree with Atze is that, yeah, any instrument, even the digital euro conceptually has a value as an option because there is another way. So it will bring something, something positive. To analyze each one, you have to...

to the currency, which are the pros, which are the cons, are the costs, are the costs going to be borne by the right party or not? So that's the beauty of each instrument. It's not conceptually that as an option, it will bring value to the table because there will be ⁓ an additional choice. So we have to compare that. So in that sense, I think that we have to work a payment system in which beyond ⁓ the strict marginal

assigning of a cost to a particular transaction, we are able to produce something which is feasible for the consumer and for the users to use. it's, of course, it is not exactly per transaction, exact calculation on each cost and each price and whether this is fair or not, because that would make life impossible. It's a consensus which makes things ⁓ doable and life easy.

And therefore we have to assume that yes, there will be cross-subsidizations and there will be ⁓ averages being applied to certain instruments and in between instruments. Why not? It's the only way to make life ⁓ easier.

Atze Faas 20:13

True, and in supermarkets there are goods that are loss leading to get consumers in the store and that's a way of cross subsidization too. But that's the choice of the merchants whether they do that or not. And if I talk to the, let's say, Visa Mastercards of this world, they're saying, well, payment costs are just input costs like electricity or like wages or like real estate. And I'm saying, well, in that case, the consumer has no choice. He cannot say, well, I'd like to use that fridge.

Javier 20:22

Yeah.

Atze Faas 20:43

or I'll use that person in the store or I'll rather ⁓ make ⁓ a choice there. Those are ⁓ even more indirect costs. And you're right, Javier, that it's always this cost-benefit trade-off. Merchants get accused quite often and I'm hearing it all the time. We're only looking at the costs and that's not true. We're having this cost-benefit trade-off. ⁓

If you and I go out to buy something, you weigh those two. We're not always seeing the value for the money. This is where we think even it should be clear to consumers. If you want to use your AMEX card or your MasterCard Gold to get all those member rewards, that's fine. But those are actually paid by other consumers who are using, let's say, Girocard or Card Bancaire.

And to your point around the taxpayer, I just wanted to make the comment there. In the end, that is the consumers paying that too through their tax bill. Yeah. Yeah.

Javier 21:46

Well, it's same person, two hats. Yeah.

Ralf Ohlhausen 21:49

You

were touching there on a very hot topic at the moment, which is how to get the account-to-account payment methods into retail stores and into particular onto POS terminals. ⁓ And how to ensure a fair selection possibility or option there for the customers. But we already start, I guess, with a bit of a

a clash of interests between what the merchants favorite ⁓ payment option would be and they are trying to encourage customers to use versus leaving the choice to the consumer on which payment method they want to use. So how do you see that ⁓ tension?

Atze Faas 22:30

How so?

Well, I'm not sure which tension you mean, I think...

Javier 22:37

Okay.

Ralf Ohlhausen 22:39

No, I mean, if

you're trying to get ⁓ people to use, say, the payment method, which has least cost to you.

Atze Faas 22:48

Well, it has the most value in terms of the cost.

Ralf Ohlhausen 22:51

Yeah, versus what the consumer wants, whatever, maybe his Amex points.

Atze Faas 22:54

Yeah,

no, no, you know, there's a freedom of choice there and we're not going to dictate anything. You know, in the end, if we don't like, let's say, Amex, know, merchants always have the option to not accept those, which is a difference, of course, with cash and digital euro where we have to accept. But I think, you know, you can't blame a merchant for having a preference and selecting that on the payment devices.

But I think we're all for consumers to override that. ⁓ once instant payments at POI, POS gets more ⁓ common for consumers to use, I think we would be happy to take those. ⁓ The same with digital euro when it comes that far. ⁓ And ⁓ so I don't see that tension ⁓ quite the way you see that, I think.

Javier 23:50

Yeah.

Ralf Ohlhausen 23:50

Okay, well, good to hear actually. you know, I'm a part of a working group at the EPSG at the moment looking at the selection of payment options and how to combine or get the account to account options there alongside the existing card options and other options. ⁓ And the working assumption is that it would be best

if that selection process would not require any communication between the merchant and the shopper so that you don't have to ask how do you want to pay and or you don't have to say so it's just sort of it can be the choice can be made without the friction of communication. And so the idea is basically that the merchant terminal POS would open up all possibilities at once.

Javier 24:19

Okay.

Ralf Ohlhausen 24:46

So

it would show a QR code, it would be open for NFC communication. would basically have the POS terminal is open for everything. And then the customer chooses whether they tap their card or tap their phone or select the WERO app and read the QR code or whatever. They take their camera to do an open banking scan. And would that be your favorite?

Javier 24:50

.

Ralf Ohlhausen 25:16

Solution as well.

Atze Faas 25:16

Well, I

think so. mean, as I mentioned, know, not all merchants will have all methods available. I'm not sure if you're suggesting that they should be mandated to have everything ⁓ available. But the merchants... Yeah.

Javier 25:28

Okay.

Ralf Ohlhausen 25:29

No, no, no, no, no, mean, obviously,

what you present, I mean, it's you presenting, it's your terminal presenting options and they're obviously limited by what you accept.

Atze Faas 25:36

Yeah. Yeah.

Exactly. So if there's this merchant site offering a suite of different payment methods and there's a match with the consumer's default choice, then the transaction should go through flawlessly and also quickly. In particular, if you think about public transport and supermarket queues. But if there's not a match, then I think there isn't a level of interaction needed where

Javier 25:48

Okay.

Atze Faas 26:08

the consumer needs to do something on his ⁓ consumer device to

have that match there. I'm with you that should be ⁓ frictionless. Having said that, there may not always be a match between what the consumer has put in as a default and what the consumer is offering.

Michael Salmony 26:35

Can I put another thing to you, Atze? There was a time when I was talking to merchants, were sometimes at least subliminally saying, ⁓ payments is easy. We're being ripped off by all these ⁓ PayPals and Visas and MasterCards and banks and everything, and we'll do it ourselves and we'll do it much better and much cheaper. And some merchants tried to do that, but it didn't go well usually when they discovered how difficult payments actually are.

Atze Faas 26:46

Mm.

Javier 26:58

Okay.

Michael Salmony 27:03

how to do acceptance and fraud and everything. Where does that debate stand now? Is there still a tendency to feel you're being ripped off or not?

Atze Faas 27:12

Well, ripped off is maybe too strong and we

feel there is an imbalance ⁓ in power. ⁓ Payments is not the core business of a merchant. So you have some big merchants who are more, let's say, sophisticated. They, like BP had ⁓ or still has, on having experts, they can afford that.

Javier 27:21

Okay.

Atze Faas 27:34

If you look at small medium enterprises, they don't have the knowledge or the manpower to look deeply into it. And I think payments was felt by senior leaders in ⁓ middle to large merchants as complicated,

as costly, as nobody really understands it. And they're turning around, I think. You see some big merchants setting up their own PSPs.

Some of our members have that and wanting to take matters in their own hand. And that sort of fits with this merchant coalition type of thinking. You know, if you are not able ⁓ to ⁓ change the imbalance in power on

Javier 28:04

Okay.

Atze Faas 28:20

your own, why not see if you can get into that mix and get that knowledge in-house?

And what you see is that then actually they offer that service to other merchants, both smaller and larger, who like that because they are saying, it's finally a PSP who understands my business more, who talks my language, who doesn't only talk about ⁓ technical integration and costs, but also talks about

Javier 28:34

Okay. ⁓

Atze Faas 28:50

how it works operationally and how it works financially. Those integrations are equally important. You can have a very

you know, smoothness, technical integration, but if it screws up your accounting system and reconciliation, you're worse off. So I think those are important things. And I think in the next, you know, maybe one year, two years, three years, you see more merchants, let's call it assertiveness, wanting to take the lead, wanting to maybe even collectively buy.

Javier 29:25

Okay.

Atze Faas 29:25

or negotiate

to sort of restore this power ⁓ imbalance. And this is also our storyline a little bit towards, you know, DG Comp and other national competent authorities that somehow we're being confronted with a lot of stuff, be it mandates or be it costs, without us truly understanding the why and the what in terms of value, what it brings to us or brings to consumers.

Michael Salmony 29:57

think we're gradually getting towards the end, but Javier, Ralf, any other things you want to use this opportunity to challenge at Sutton?

Ralf Ohlhausen 30:02

I do, but I want let

Javier go first.

Javier 30:05

Okay, well,

I just a comment there listening to Atze which has been very interesting I think that there are some fundamental symmetries in in in relation to merchants merchants I would say they they they see payments in two ways the ones who are which are regular and they pay for the the the standard level of sales that they look into the cost very

with a lot of detailing and very carefully. But when you talk about additional sales, then the price of the payment instrument allowing that additional sale can be anything because it brings a lot of margin. And that's the reason why 50 years ago, credit cards became popular because they brought additional sales. So merchants were very happy to pay high fees for those payment instruments. When they become the normal, then they are not seen as a premium

instrument allowing additional sales. So they look them asking for the cost and being very scrupulous on what they are able to pay. But at the end, if a payment instrument is able to bring new sales, that will be very much welcome. But there is this kind of ⁓ dynamic in between a new payment instrument bringing new sales and becoming the next normal. And also, ⁓

the way merchants ⁓ approach ⁓ payments, well, they have to understand also that they are ⁓ in a competitive market. So if we think that we are in a competitive market, the prices will go wherever they have to go, provided it is a competitive market. if they rise, well, sometimes fuel price goes up and then down and

So, but then what we have to ensure is that there is a competitive market that prices go up and down. That's something natural in a market, but we have to look after ⁓ thorough competition. think that.

Atze Faas 32:01

Mm-hmm.

Yeah, now

I agree with that, you know, and we've seen a level of commoditization of payments and therefore, you know, it would be logical that prices go down, especially if volume and value ⁓ increases. But we are not seeing that. And one of my other beefs ⁓ is, you know, percentage based fees. Why are they still, you know, the most common, ⁓ especially in the international card schemes and buy now pay later?

Because once SCA is ⁓ applied, we sort of out of that ⁓ equation, it's ⁓ properly authorized, it's properly authenticated. Why should there be a difference between an e-commerce transaction and a in-store or between ⁓ inter-regional and domestic or between credit and debit or between commercial and consumer? It doesn't make sense ⁓ to us. ⁓ And so I think this is

⁓ the sort of thing we have to go through and the additional sales, you're right. And if merchants make a conscious choice to offer buy now, pay later because they think it will bring additional business, of course they should. And if they are prepared to pay the price because of ⁓ let's say, sales it brings in, also fine. But I just want to remind you, offer memberships.

Javier 33:25

Okay.

Atze Faas 33:37

The average margin or so on food is something between 1 and 2 percent. On non-food is somewhere,

you know, 3 to 4 percent. If you compare that with the margins that, let's say, Visa and MasterCard of this will make 50-60 percent, it sort of shows you the lack of competition on that side and the fierce competition on the merchant side.

Javier 33:45

you

Ralf Ohlhausen 34:00

W-w-w-w-w-

Javier 34:01

But there are different species of PSPs. I guess that those who are providing services to merchants, they also behave as merchants with providing their services and their freedom to ask for what they think is fair. Why wouldn't be merchants in their provision of services to other merchants?

Atze Faas 34:09

Hmm? No.

So this is one of our worries. In many cases, when we talk to acquirers, especially if you're on an interchange plus plus basis, they will say to the merchant, well, the only thing we can negotiate the merchant is on our acquirer margin, acquirer fee, everything else is a given. So they sort of lean backwards and they say,

Interchange is a given scheme fees. We don't understand them because there's 800 to a thousand difference one of them. And when we say to them, are you sure you're not making any mistakes? They're saying, no, no, no, are regulated entities. We're not making mistakes in scheme fees. But at the same time, they don't understand them. Neither do we. And they make errors. In BP, we had one of those cases and the acquirer was adamant. The billing was flawless.

and we found hundreds of thousands of billing errors not in our advantage. So I think ⁓ it's being made overly complicated. It's being made ⁓ unnecessarily ⁓ intransparent. And that leads to those cases. Now, if you have then merchants who choose consciously for blended fees, you may have a point there that there is more alignment of ⁓ interest.

But I'm telling especially to my SME members, know, when in the blended fee, the acquirer, the PSP has to build in some margin to deal with fluctuations over the week, over the month. He's not going to make a loss making business on that. So you're paying a little bit of a premium, if you will, in the blended fees. But it gives you the ease of reconciliation, you know, the ease of billing if you don't have a department that wants to split it all out, you know.

Javier 35:53

.

Atze Faas 36:14

It's up to you as long as you are aware of that choice. And I was talking about consumer

literacy. There's also merchant literacy. I think many merchants still need to better understand how payments work, especially digital payments, in order to make that value cost trade-off.

Javier 36:25

Okay.

Ralf Ohlhausen 36:33

I have two more questions. I have to hurry up, I guess, to fit them in. But the first one is because we spoke a lot here about how to win the hearts and minds of consumers for a payment method. So

Atze Faas 36:38

I'll try to be short.

Ralf Ohlhausen 36:47

now my question to you is how to win the hearts and minds of the merchants for a payment method. I was always under so my thoughts were that the top three drivers

Javier 36:51

.

Ralf Ohlhausen 37:02

or criteria was number one, reach number two, conversion and number three, only the price. So do you have share that view have a different one?

Atze Faas 37:16

No, I

think we're on the same page there, but I call it differently. So first and foremost for merchants is the consumer experience, the customer experience. We are in the business of selling goods and services. everybody loves to buy but hates to pay. So you have to make that payment piece as easy as possible for a consumer. That brings you to that conversion point.

making sure that you serve the consumers in the best way. But again, you want to do that at a ⁓ fair value, a fair cost, so it remains affordable. So we very much are, if you will, representatives of the consumer side in making sure this value for money ⁓ trade-off ⁓ is there. Now, having said that, you see merchants taking a step forward and saying,

Javier 38:01

Okay.

Atze Faas 38:13

Well, why don't I try to

Javier 38:16

Okay.

Atze Faas 38:16

get as much of that customer journey in my own hands? You you have these merchant apps that ⁓ combine payment with loyalty, with identity, with accounts and with other nice bits and bobs. And this is like you see with ⁓ other ⁓ offerings, you know, ⁓ trying to increase consumer stickiness is then a word that retailers use a lot.

Ralf Ohlhausen 38:42

Okay, well, thank you. And my other point

Michael Salmony 38:42

Mm-hmm.

Ralf Ohlhausen 38:45

is, is about the, ⁓ well, how to bring different initiatives possibly together, we touched on initially, so interoperability of all these various account to account payment systems coming up. And I wanted to test the the EMPSA suggestion.

Javier 39:01

Okay.

Ralf Ohlhausen 39:06

you on that, because they are basically saying that the regulation should impose interoperability

similar to the GSM roaming at the time. So we had all these different, you know, systems, different countries, not systems are all GSM, but we have different things and quite different commercial models. And it was expensive to roam. And then it was basically imposed that roaming should be sort of transparent and everywhere you can go everywhere make calls as if you were at home.

Javier 39:14

.

Ralf Ohlhausen 39:36

And so that's the model they are they're proposing there. So basically interoperability framework, they call it EU pay. And then regulation

Javier 39:44

.

Ralf Ohlhausen 39:45

would impose that whoever wants that label, you pay whoever wants to be part of that has to be interoperable with all the other ones. And, and then based on that, every EU merchant would have to accept one of those, but only one.

Because if you accept one, then it would be interoperable with the other one. So ⁓

Atze Faas 40:09

Well, yes and no.

Ralf Ohlhausen 40:09

would that be, would that fly with you?

Atze Faas 40:12

No, it doesn't. I understand it from the consumer point of view. If then I am a Blik consumer and I want to go to Spain, I transact on the Bizum enabled terminal as it were a Blik transaction. But if you're a big merchant like let's say H ⁓ or IKEA, you would still have to have a Bizum integration in Spain and a Blik integration in Poland.

and they may not necessarily be the same. this is why I'm calling, you know, ⁓ let's jump over our own shadows and, you know, come with this European infrastructure that would enable both Blik and Bizum and that would very easily enable Bizum ⁓ consumers to use their payment, favorite payment method in the Netherlands or Poland or wherever, and would still have this ease of integration. So what I do like about EMPSA is, you know,

Javier 41:00

Okay.

Atze Faas 41:07

making it easy for the consumer. I still do not see and Christian tries to convince

Javier 41:13

Okay.

Atze Faas 41:13

me a number of times how it's going to make my life as a merchant, a multi-country merchant ⁓ easier. And I just wanted to make one other comment, you know, and I've said this aloud in many fora already. Somehow we're talking about, you know, a capital markets union. We're talking about a savings and investment union, but we're not talking about a

payment services union, I think we should

jump ahead. Also in the leapfrogging context, Michael, let's create a single market for payments. Then we can leave a lot of this sort of ⁓ member states, ⁓ kingdom thinking behind us. If we want to win in the global space, we need to take some drastic steps and be able to give up some of our local hobbies.

Javier 42:04

Yeah.

Michael Salmony 42:05

Thank you, I'd love that of course.

Javier 42:07

That was the intention of SEPA. SEPA is the Single Euro Payments Area. And I think that that's the last target. But I think that we have gone through ⁓ phase 1.0. We need a SEPA ⁓ 2.0.

Atze Faas 42:20

agree fully agree

Michael Salmony 42:23

Okay, I think I must gradually call it to an end. been a completely fascinating discussion. Atze, you've been lucid and very clear and incredibly knowledgeable. Thank you for sharing all your views. And when finally the TPT podcast launches its own merchandising range of t-shirts and cosmetics, we will reach out to you how to sell it to the market. Thank you very much, Javier, Ralf, everybody for watching and Atze for joining us.

Atze Faas 42:34

You're welcome.

Absolutely.

Thank you very much.