Digitalisation in payments: From interoperability to centralised models?

Abstract

‘Digitalisation’ seems to be the current buzz word, and it is used to discuss various things from 3D printers via always-on health sensors powered by smartphones to challenges in financial services by new ‘non-bank’ players (so-called FinTechs), which track relationships with the clients. Payments, as an electronic product offered by banks for decades, are taken here as the subject of study to analyse the impact of digitalisation and future developments in payments. This is based on three examples representing three antagonistic concepts: interoperability, centralisation, and distributed systems. The examples highlighted here are: first, the implementation of the Single Euro Payments Area in Europe and a comparison between some original objectives with the current status of realisation; second, the development of so-called business platforms, such as Google or Facebook, which facilitate exchange between the agents in a multi-sided market; third, the emergence of digital currencies such as Bitcoins with decentralised ledgers and decentralised consensus systems used as means of payment. For all three examples, the form of digitalisation, the current implementation, potential limitations and future development paths are compared. Finally, the question of what a future payments ecosystem will look like and whether there will be a shift from interoperability to centralised models are discussed with the clients.