90% of schemes think prospects have improved thanks to member banks and regulators increasing support as they diversify beyond card-only payments

The Payments Jury today released its latest report which focuses on Domestic Payment Schemes, revealing that confidence is at an all-time high with 90% of domestic schemes indicating that prospects have improved thanks to member bank and regulatory support alongside increased cross-border collaboration and diversification beyond card-only payments.

The report is the fourth in a series into domestic card schemes and switches that has been published by the Payments Jury since 2013. For this report the Jury was made up of 36 participating organisations from 35 different countries, across all continents, and illustrates the momentum that is building behind domestic schemes and switches.

Diversification for the future

The 2018 report found that over 50% of the card schemes now have wider payments responsibilities with at least one additional type of payment within their remit, and a third are now managing two additional payment types. The Jury expressed a widely held view that to remain card-only would be a strategic error especially as the market moves to a mobile-first model. Within the card sphere almost all schemes have decided that they must have e-commerce, contactless and mobile capabilities if they are to respond to consumer demands and to compete effectively with international players.  

“Domestic schemes and infrastructures can play a critical role in creating a bridge from the status quo to the payments world of the future, owing to their deep understanding of and connections into domestic markets combined with their low-cost approach,” explained John Chaplin, Chairman of the Payments Jury. “But there are many players with competing visions of the future and the domestic organisations are going to have to evolve quickly to be the successful builders of the bridge to the future.”

Cost-efficiency

Cost-efficiency continues to be a key advantage of domestic schemes and switches over the large international players – with 80% of domestic operators having costs that are between 25-50% of the costs of international schemes for a similar service.

“The Jury indicated that domestic schemes are generally optimistic about their prospects due largely to greater support from their member banks and in particular in emerging markets where the low-cost approach supports governmental initiatives for financial inclusion,” commented Chaplin. “However, there is evidence that if fees are too low it inhibits the necessary product development and investment required to innovate. Put simply, a scheme can be too low cost for its own good.”

Collaboration

The 2018 report found that there has been a significant increase in cooperation between domestic schemes in different markets as it is realised that they do not all have the resources or the time to develop everything themselves at a national level. 80% of schemes have increased their cooperation over the past two years. The strongest areas of cooperation are currently cross-border acceptance although the greatest long-term potential for cooperation is on technology.

Chaplin commented: “We have seen that despite the overall trend towards globalisation in technology-enabled businesses, there is a clear and growing political desire by many markets to keep control of their domestic payments. However, over recent years, the global payment giants have built amazing capabilities and it is only natural that many central banks and national banking communities want to have the benefits of both approaches. The 2018 Domestic Payment Schemes report has found that the vast majority of players are exploring the concept of a co-existence of national organisations with global players.”

The Domestic Payment Schemes report was launched at the 4th Annual Conference of Regional Card Schemes & Regional Financial Market Infrastructures organised by the World Bank and The European Card Payments Association and hosted by STMP (sistema de tarjetas y medios de pago, s.a.) in Madrid. There were over 100 attendees from central banks, payments regulators, payment schemes and infrastructure companies from all five continents.