EPSG

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 Javier and Ralf now have a guest today, Torbjörn, who's ⁓ head of the EPSG. This is one of the many European gremia fora that we have, and I must admit, I know very little about it.

Apparently it used to be for cards, so it coordinates sort of cards activity in Europe, which makes me ask why doesn't EMVCo already cover that? But now it's doing more than cards. It's doing also Instant and SEPA, which makes me ask why doesn't already EPC and ERPB and various other ones do that. So Torbjörn, welcome to that. Maybe you can educate us and explain what is the reason for your organization.

Torbjörn 1:03

Yeah, thank you. Yeah, my name is Torbjörn Furubjelke. I work for Nordia Bank in, situated in Stockholm, Sweden, but we are the Nordic Bank. We're head office nowadays in Helsinki in Finland, due to the Euro connection. But we are truly Nordic Bank and we don't feel Finnish or Swedish, etc. But I'm Swedish and work in Stockholm.

and have done so for almost 25 years now, mainly focusing on cards. So that's card payments is the sector I'm coming from. I've worked in both acquiring and issuing business development and with mobile and e-commerce payments also, but with the card focus all the time. And Nordea is the largest bank in the Nordics and one of the largest banks in Europe.

Then I'm not head of EPSG because we don't have any heads or general directors or anything like that. I'm currently the chairman of the board, which doesn't mean that I know everything that this is performed in the association. We have a lot of ⁓ experts in different expert teams and we have a volume group that coordinates most of the work on the SEPA standardization.

that we collect in the volume. But to explain the background for EPSG, the difference from EPC, et cetera, it's actually not that separate from EPC because the whole thing was started by EPC, European Payments Council. When EPC was formed, it decided, as you know, to create the SEPA schemes for account.

payments, credit transfers and direct debits in Europe. And then the question was what to do about cards and card payments. it was realized at that time, I must not be involved at that time, as I've been told, it was realized that, yeah, we already have Visa, Mastercard and a lot of national schemes currently already in place in Europe and quite maturely so.

what is the problem? It's the lack of harmonization. in the market that for instance, merchants might have to have different terminals, that the terminals for card payments needs to be certified in each country and cannot have a license for every country in Europe, etc. So

and a lot of other things that at that time was seen as a need for harmonization. So EPC then decided to firstly create a SEPA card framework which was on more high level description of what is needed to harmonize the market for card payments in Europe which many of those things like separation of

Scheme and processing that you don't have to be licensed as acquirer for every country etc. was more or less realized also by the interchange fee regulation. So this is a document that is no longer in practical use. But what was then realized was also that we needed some kind of more prescriptive requirements for standards in

card payments in Europe in order to achieve the harmonization. So we don't actually work with standards, to be precise we work on requirements on standards. So for instance that is the difference between EPSG requirements and EMVCo standards because we then can request or require things that is needed for achieving the harmonization in

the European market ⁓ also ⁓ to EMVCo. One example is for instance when we had the PSD or the sorry the IFR requesting that merchants should be able to separate their acceptance ⁓ on four different types of cards. Debit cards, credit cards.

prepaid cards and corporate cards. So then we needed a new product identifier in the standard to be applied in the cards and for merchants to identify that so that they were able to make the separation.

So that was a requirement that we made in our standard requirements and then EMVCo introduced that in their standard. So yeah, sorry. Yeah.

Ralf Ohlhausen 5:16

Could I actually ask you something?

could I just ask you something on that? Because?

Well, the the what used to be the ECSG card stakeholder group has this large, it's actually a 10 book volume, isn't it? So it's, it's not just a some requirements, there is a lot, isn't it?

Torbjörn 5:41

It's seven books, yeah, it's seven books and

it's now it's seven books in the volume of requirements and a couple of annexes like the tokenization annex, et cetera. But yeah, so it's a lot. what was your question about that?

Ralf Ohlhausen 6:00

Yeah, well, what is the lot because I think you have all these seven books. What are they about?

Torbjörn 6:04

Yeah. Yeah.

Yeah, as I said, there are requirements on standards for card payments. So if you are a standard provider or specification provider, you can look into this and see that you are, so to say, SEPA compliant so that we achieve harmonization so that we can have a terminal provider can...

make a terminal that is certified in one place in Europe and can be used everywhere in Europe for all the different schemes Visa, Mastercard and AMEX and also the national schemes as long as these also follow these requirements. Going back to the history there, the EPC realized that after time that EPC was not

able to do this by their own. So they invited other stakeholders that are now in EPSG, which is a stakeholder group that's the SG. So that started already in 2009 with as an informal association or setup, which was called Card Stakeholder Group, but it was all managed by EPC and the

intellectual property rights were by EPC etc. So that stage lasted until 2016 where CSG was reformed as a separate association which was renamed as European Card Stakeholder Group ECSG which is then a separate association with equal shares from the five different stakeholder groups that is the PSPs, payment service providers,

PSPs as defined in PSD2, PSD1, banks and payment institutions, etc. And also now of course TPPs. And as one sector represented by EPC as the only member in that sector, which is organizing all of these different payment service providers. And then also the retailers, the schemes, the merchants.

Sorry, in this case, retailers, processors and vendors. Which were already done, the setup for that.

Michael Salmony 8:08

Sorry,

can we just stop you? I'm sorry, I'm just not understanding why we need your organization, to put it bluntly. Every country has merchants, has credit cards, debit cards, prepaid cards, tokenized cards, EMVCo takes care of that and various other things. What is unique to Europe, why we need a European organization?

to ⁓ standardise that or to certify that or whatever you're doing. I'm not getting the essence of what your raison d'être is, I'm afraid.

Torbjörn 8:41

Yeah, tried to explain that work, especially at the time when this work was formed. And again, as I said, it was initiated by EPC to create a single euro payments market also for card payments.

and it was addressing the lack of harmonization in the different setups, which was actually very national when it comes to things like processing and terminals etc. So there was a need for this harmonization on these standards and specifications for and certification processes etc. Which is also in a

Michael Salmony 9:22

There are global standards like EMV and European processors like Worldline.

Why does one need that? But there are global standards like EMV. There are already European organisations like ERPB. are European processors like Worldline. What is the difference that you're adding?

Torbjörn 9:29

Sorry?

Javier 9:43

Maybe I can help here with giving an example. I think in those days the ambition was to make it feasible that any card could work on any terminal, any European card on any European terminal, which was not the case. I remember very vividly the example provided by European Parliament members traveling from Brussels to Strasbourg

Michael Salmony 9:47

Thank you.

Javier 10:08

and not being able to pay with their debit cards the tramway in Strasbourg. And this was something that could not be accepted. And therefore you needed this and the claim was to make feasible any card on any terminal. And I think that gave way to the whole idea.

Michael Salmony 10:13

No.

What?

I mean, that makes a lot of sense. I fully understand that, but it doesn't work to this day, right? You can't use a Girocard in any country except Germany, and the bar Card Bancaire only works in France. if that was the goal, I'm not seeing that that has been achieved in any way.

Torbjörn 10:41

Yeah, I mean, technically, I guess it could. It's about what acceptance you have and the commercial agreements you have with your acquirer. I mean, from a technical viewpoint, they should be of the same standard.

So if there is a commercial ambition to expand Girocard out of Germany and Card Bancaire out of France, then it's technically possible. But then there's commercial decisions to be made by both schemes and merchants and acquirers etc. to do so.

Ralf Ohlhausen 11:15

Yeah, so I think it has added the technology on the terminals, like different kernels as well. so I think it's about the requirements, not the standards. So it's about to tell the standards what to change, what to add, what to remove, how to evolve, how to make it more European and all of that. But sorry, back to you, Torbjörn.

Torbjörn 11:16

Yeah.

Yeah.

Yeah.

Yeah, and I mean, the things you mentioned like ERPB, etc. didn't exist at the time. of course, the things have evolved. This was like 20 years ago. But what also has been useful, I think, is to cater for European legislation, which has been

been quite extensive in the payments field, and especially for card payments in the last decades with PSD 1 and 2 and interchange fee regulation, not the least. And again, it's also about discussing how to implement these things with all the stakeholder groups. Then a question that sometimes pops up both in my

bank and then with other other banking.

people I meet that are involved in card issuing especially, why don't I know anything about EPSG and these requirements? Yeah, that is because many of the things that we agree on in consensus in formally ECSG, then now EPSG on the card side is implemented in the scheme rules and scheme compliance changes that you have, that you

are very aware of as a product manager for card issuing. But you don't realize that we have in this forum with all the stakeholders been able in a non-competitive environment discuss and agree on these things. And then VISA and Mastercard international schemes implement these requirements. For instance, to cater for the IFR as I mentioned before, or with those...

strong customer authentication rules with PSD2, which require a lot of different details in the infrastructure to work in the way that the legislature requires. So these are examples that are more recent, what the use has been in the card area. But then...

As you may be indicate, card payments are now quite mature product and many of these things work more or less fine. But what has been something that some of the stakeholder groups, especially the retailers, the end users, so to say, among our stakeholder groups have requested for a long time is an expansion on this setup.

from card payments, the narrow scope of card payments from the beginning to all types of retail payments that can be accepted at the point of interaction, and especially then mobile instant payments that have emerged in different ways and forms in different countries in EU and Europe. So that has actually been discussed several.

several times since ECSG was launched as a separate association in 2016. But has been both reacted, both one and two times, especially by EPC, the PSP side, until we finally made that decision in late 2022, I think, to expand the scope to all retail payments. And that has been...

Since we also then at the end of 22 released the last full version of the volume, which is only the volume 10.0, which is still only focused on card payments. Then we have in this, sorry.

Michael Salmony 15:04

Torbjörn, sorry not to get on your way. Can I stop you?

You mentioned earlier that your organization was formed before some other European fora were there, and I understand that. But you say in 2022, you expanded your scope beyond cards to also include other means of paying at the point of sale. But at that point, the ERPB already did exist. In fact, there has been a study for PIS at POS and all sorts of other things of

Torbjörn 15:25

Right.

Michael Salmony 15:33

how to do the point of sales experience. So again, sorry to keep asking the same question. What difference do you add to those things that are already happening in other forums?

Torbjörn 15:43

Yeah, that we have the same way of forming requirements and standards with all the stakeholder groups involved. don't think the ERPB has this kind of detailed set of requirements on how things are working on the point of interaction. Then I guess they are also addressing other things that we are not looking into in EPSG, which is

Javier 16:05

you

Torbjörn 16:07

especially for the payments focused on the interaction in the point of interaction.

Ralf Ohlhausen 16:16

If I could tell a

more side story here on that subject, well, firstly, maybe a ⁓ little disclosure that I am actually at the moment on the board that Torbjörn is chairing and representing, well, not just ETPPA, but also actually the whole PSP stakeholder group on behalf of the EPC.

Torbjörn 16:28

So maybe it's easier to, yeah.

Ralf Ohlhausen 16:41

but, I had like going back to this 2022, we had, uh, uh, big concerns actually when the EPC, uh, decided to sort of hand over the instant payments, uh, mobile instant payments requirements part to the ECSG as it was called at the time.

We were the only board member on the EPC voting against that because we thought, well, come on, now we have, we're finally getting some competition for cards on the go. And now why should we basically hand this over and let the fox guard the hen house? So that was our big concern.

Torbjörn 17:29

.

Ralf Ohlhausen 17:30

And, well, the decision was done by the EPC, the board decided against, well, as I we were the only one voting against, then, I, or we as an organization, ETPPA, we then also followed that and said, okay, well then, okay, then let's work with the ECSG and accompany that change from cards to payments in more general. And

Javier 17:53

. .

Ralf Ohlhausen 17:53

Now, looking back, can say that I think it was the right decision. ⁓ we, there was, I think this card stakeholder group was accommodating the instant payments quite, quite well. So it wasn't the card scheme sort of working against it. And also, by the way, there were all the other stakeholder groups like the vendors,

the merchants and the processors, et cetera. So

they have all actually a vested interest in account to account as well. And so this has then led to new working groups as part of the EPSG, which is especially about making it possible to use account to account on these card terminals. So basically turning a card terminal into a payments terminal and defining the requirements.

And of course, this requires a lot of technical detail that is course far beyond what the ERPB would be talking about.

Javier 18:42

you

If I may get deeper on one aspect, which is how do you perceive, how do you understand the argument about the lack of sovereignty in payments in Europe or the need to strengthen sovereignty in European payments? What message do you get and how do you react to it?

Torbjörn 18:52

.

Do you mean EPSG as association?

or I mean, yeah, I mean, this is, of course, a hot topic and a lot of if you ask, ask, if you ask two people in the business, you get three answers, I guess. So I mean, it's, but I mean, as association, of course, we sorry.

Javier 19:19

Is there any impact?

Does it have any impact in the association?

does it have any impact in the association, this debate, this public debate?

Torbjörn 19:34

I mean, not directly, mean, as then, of course, I mean, it's part of the.

I mean it's already part of kind of what we set out to do in 2022 that we also include instant payments at the point of interaction to get these requirements in order for this to be harmonized and more or at least possible to be interoperable and also harmonized with the card requirements at the point of interaction. So I mean it's

facilitating that and that is what we been working with closely in three years now. Our usual cycles are three years now we have used three years to come up with this just recently this 10.5 version for public consultation which is a normal step in the process so that we can publish the first volume the number 11 then integrating also instant payments. I mean of course this

debate on independence etc. has been more recent and not directly influencing the work and we have

had quite a lot of discussions on how to, because as Ralf indicated, was quite complex to integrate this with existing requirements on card payments and to make it harmonized use of terms and terminology and so on to make this work.

There have been a strong focus on that. But of course, it's in essence there to facilitate also these different instant payment schemes to become more interoperable. Then of course, these schemes need to, as they are now doing, also discuss this in a more practical and commercial way with the recent, for instance,

announcement that the EPI and the schemes involved in EuroPA are working on making their different schemes interoperable by the end of this year for P2P payments.

But it's not, mean, EPSG is in the non-competitive space and it's not for us to kind of implement and or launch any actual commercial solutions in that sense. But hopefully what we are producing can facilitate this. Yeah.

Ralf Ohlhausen 21:58

Yeah, and if I may add...

Yeah, if I may add that, so, I mean, having been part of some of these working groups there, I think it is ⁓ very constructive to look at the wider goal of making account to account payments. So I obviously have represented the open banking view and how the flows would work or should work on especially at POS or physical retail payment stores and how to make open banking work there.

But then, of course, there is guys from EPI, from EuroPA, from others that are involved. And I think the big advantage of having this here at the EPSG is that we also have all the other stakeholders, which are, of course, playing a role, the merchants and the, well, I mentioned the terminal vendors and other schemes. So therefore,

The discussion at the end is

Javier 22:54

.

Ralf Ohlhausen 22:56

much more comprehensive and closer to a solution than if it's discussing it inside the EPC, which is just looking at the banks or the PSP perspective.

Michael Salmony 23:07

Would you agree with that, Torbjörn, or do you want to add anything?

Torbjörn 23:08

Yeah, but

No, I agree with what Ralf said. Then what was that answer to your question also, Javier?

Javier 23:16

Yeah, yeah, absolutely. yeah, yeah, yeah. But certainly what I would like to underline is that even the EPSG is also a cooperative vehicle. it's addressing those issues that could be addressed through cooperation. And all competitive aspects are left aside.

Torbjörn 23:18

Yeah, yeah, yeah.

Javier 23:36

Of course, in that sense, it is limited because it is focusing on some aspects and others are for others to be dealt with.

Torbjörn 23:41

Yeah.

Exactly.

Michael Salmony 23:43

Okay. I

think your time is gradually coming to an end. unless there's anything else that needs to be ⁓ discussed, would like to thank Torbjörn for elucidating us the existence of EPSG, yet another organization with four letters beginning with E. I think a number of people looking at our podcast from outside think we in Europe are a bit mad. How many fora we have.

but I think we understand a little bit better what you're doing. I was particularly taken by the idea of this sort of roaming for national cards, right? You didn't put it that way, but that's what I'm hearing, right? Like a sort of EuroPA for cards, right? So that I can use my German card in Belgium and the French card in Poland. That sort of sounds like an interesting concept, but I understand you're doing the technical work and not the commercial work. And I'm also not seeing a huge amount of that happening.

I there was one transaction where a Girocard was used in France.

Yeah, that's fair enough. And we did see that EPI 1.0, which tried to do a pan-European card, of also discovered how difficult that is. No, fair point.

Okay, thank you. That's really helpful. Alright, so again, thank you, Torbjörn and Javier and Ralf. And I hope we managed to cast some light on yet another four-digit e-something-something-something organization. Thank you for watching.