EPI’s roll-out begins but scheme compliance and dispute resolution questions remain

In 2020, the European Payments Initiative (EPI), a collaborative endeavour between the European Central Bank (ECB), payment providers and 16 of the continent’s major banks, set out to create a unified digital payment service for Europe.

Ultimately, the success of the EPI’s efforts depends on consumer adoption

Four years later, following acquisitions across Europe and intense development efforts, the EPI has launched its account-to-account payment solution Wero in Germany, with Belgium, France and the Netherlands expected to follow shortly. The scheme aims to unify European peer-to-peer transactions, enabling users to send and receive money across the borders of supported countries within 10 seconds.

As the project expands across Europe, the innovative payments solution faces a range of outstanding areas to consider. Chief among them are scheme compliance and fraud and dispute management.

Scheme compliance and managing fraud and disputes

Scheme compliance is a major pillar of any payment ecosystem, enforcing interoperability and maintaining consistent consumer experiences. It’s the foundational framework that enables the seamless operation among all participants in the ecosystem. International payment networks, such as Visa and Mastercard, have instituted scheme compliance to keep participants informed of updates and requirements. Weekly bulletins, accessible portals and stringent deadlines are all important parts of their robust compliance mechanisms.

However, replicating such a vast and complex operation will be challenging for the EPI, involving a tremendous effort to collaborate, coordinate and enforce strict procedures with a wide range of stakeholders.

Alongside scheme compliance, the EPI will need to consider the management of fraud and disputes. E-commerce transactions are continuing to rise as the industry is expected to grow at an annual CAGR of 7.24% until 2028, according to Research and Markets, increasing the importance of consumer protection. Consumers need assurance that they are safeguarded against mishaps, whether it be a failed delivery, a defective product or a cancelled service.

At present, most account-to-account payment methods lack defined rules or guidelines around consumer protection. Contrastingly, the likes of Visa and Mastercard have developed robust protection frameworks. As cardholders, their customers can dispute transactions, provide evidence and potentially get reimbursed if things go awry. Such protections not only provide peace of mind to consumers but also foster the adoption of these payment methods.

Key questions remain unanswered

In a January interview with Fime Consulting, the EPI’s Chief Member and Strategy Office, Ludovic Francesconi, provided some clarification of the EPI’s approach to compliance and dispute management.

Regarding scheme compliance, Francesconi emphasised that the EPI’s Wero mobile wallet service avoids intermediaries, reducing the number of stakeholders involved in transactions. However, Wero maintains direct connections with local banks, utilising SEPA’s Instant Credit Transfer scheme to settle payments within 10 seconds. Therefore, scheme compliance is no less necessary, and it remains to be seen whether it will adopt best practice and establish clear rules and guidelines for topics such as consumer protection. Providing a consistent, well-regulated dispute resolution process across all participating banks is crucial, giving customers the confidence they need to adopt this new payment method.

Francesconi also commented on the settlement of payment disputes, confirming that the EPI’s solution facilitates chargebacks if consumers and merchants are unable to resolve a dispute directly.

However, guidelines for dispute resolution have not been clarified, and the EPI needs to outline a well-articulated strategy to handle fraudulent transactions. Striking a balance between convenience, security and customer protection will be a delicate act, but one that is essential to the solution’s long-term success.

As the EPI rolls out its innovative payment solution to consumers and businesses, bringing European citizens closer together through seamless cross-border transactions, key questions remain unanswered concerning scheme compliance and dispute management. Despite clarifications from the EPI earlier this year, adoption of industry-standard best practices remains uncertain, and participating banks still lack clear dispute management guidelines. Ultimately, the success of the EPI’s efforts depends on consumer adoption, which will be heavily influenced by seamless operations, ease of use and consumer protections.