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July 25, 2012updated 04 Apr 2017 4:14pm

Will your bank do MyBank?

Designed as a pan-European, SEPA-compliant OBeP system, the initiative hopes to provide a universally-accepted method for e-commerce transactions But, asks Sara Perria, whats in it for the banks?

By Sara Perria

EBA Clearing’s MyBank initiative is currently being piloted in markets across Europe. Designed as a pan-European, SEPA-compliant OBeP system, the initiative hopes to provide a universally-accepted method for e-commerce transactions. But, asks Sara Perria, what’s in it for the banks?

 

‘My banking details stay with my bank: it’s as simple as that’. So reads the marketing material for MyBank, the SEPA-compliant online banking e-payment (OBeP) network being developed by Euro Banking Association subsidiary EBA Clearing.

This is undeniably an attractive proposition for the consumer, particularly in those European markets where online card payments are struggling to gain wide acceptance.

But what is the value proposition for the banks expected to deliver the service to their customers?

Plans to develop an OBeP for sending consumer payments through the SEPA direct debit and credit transfer systems were first presented by the EBA in June 2011. A year later, in June 2012, a technical pilot programme was launched, involving banks across Austria, France, Greece, Italy and Luxembourg.

The aim of MyBank at this stage is to verify the efficiency of the system.

But for MyBank to become a widespread means of payment banks need to get behind the technology. As such the big question is: How are they likely to make money from it?

Zil Bareisis, payments specialist from consulting firm Celent, explains that while there are clear upsides for OBePs, there are also important issues that need to be resolved for MyBank to work.

“MyBank is a great idea: it is a push, as opposed to a pull payment system, and the end-user is not actually giving thier credentials to a third party,” Bareisis says.

This has been the main incentive to the development of MyBank as an alternative to credit and debit cards or card-linked wallet systems like PayPal.

Cards, Bareisis stresses, have different popularity levels in different countries, and there are several issues related to cross border payments, which are not easy to execute.

“So having a new electronic payments system would be valuable,” Bareisis admits.

 

Cannibalisation risk

There are, concerns not about the theory, but rather the implementation of MyBank. EBA Clearing, rather than developing the full infrastructure, has provided banks with standards and rules.

“But a part is missing,” says Bareisis. “In order to offer the system, the bank will have to develop the infrastructure for the authorisation of the payment – where details are passed between merchants and bank.

“This is relatively straightforward, but the point is that it is still an investment and an effort. And there seems to be a question mark on the return side: I do not think MyBank promises anything in return, there isn’t an interchange model in place”.

This is the criticism that needs to be addressed. If there is no revenue generated from interchange, or other fees, what is the incentive for bank? And, given the option, why would the bank encourage its customers to use it?

In Bareisis words: “There’s a value in serving the costumer but if there is no money coming in you have to ask your self ‘why?’”.

And it is not only the lack of income that raises doubts over MyBank business model. There are also fears that implementing the system would be to “cannibalise” banks’ own card portofolios, particularly in those markets where online card usage is high and rising.

“While until now many banks are making money from online card transactions, they would find themselves having lost this source of revenue and eaten in their own business,” is the paradox highlighted by Bareisis.

EBA Clearing’s director John Broxis does not share this view, and rejects the “cannibalisation” issue. MyBank will not eat cards’ business, as these “are currently not used that much on the internet” and, when they are, “there is growing concern about the way they are used, especially among e-merchants,” he says.

“A French report published in 2011, for instance, stated that online purchases only account for 8 percent of all card payments in France today – but these card payments cause 61 percent of the fraud related to purchases on the internet,” he adds.

EBA Clearing’s argument is that MyBank has the potential to make the use of cards for Internet purchases safer, which will result in effectively reducing costs.

The banks’ infrastructure investment will covered, they say, by the fact that customers will visit their online banking platform each time they authorise a payment via MyBank, fostering growth opportunities in terms of customer Communication, cross-selling and up-selling.

But is this enough to counter the concern that there is no direct source of income from OBeP payments?

 “The investment required for MyBank is very moderate,” explains Broxis. “Buyer banks need to implement or outsource a validation service to handle the transaction requests from the seller bank and to communicate with their customer. Seller banks will additionally need a routing service to communicate with the merchant and the buyer bank,” he explains.  

The main tool banks need is already in place: their online banking platform, where the generation of each transaction is highly secured through a double authentication process.

 

Pilot success

The project has had widespread support in Italy, with major banks, representing some 75% of market share, such as Unicredit and IntesaSanpaolo, backing MyBank and adhering to the pilot phase.

Electronic Payments International asked directly to them to explain whether they see implementing MyBank as posing a threat to card revenues, and this does not seem the case.

One of the Italian banks involved in the pilot phase says that MyBank “represents a value for all stakeholders and the forecasted pricing structure turns it into a gainful solution sustainable over time”.

The bank says the project gives banks the opportunity to enter the e-payment market, thus being able to assist people in making the most of the opportunities offered by the online economy, which continues to see constant and significant growth rates, even against such an otherwise sluggish economic outlook.

“MyBank is an e-payment solution that complements card payments,” says the bank. “Although the project implementation begins with the OBeP, it also ties in with other projects such as the SEPA direct debit, if the client will want to use them,” sources say.  

Banks are also coming under pressure from online retailers to improve online payments options, not to mention from regulators, such as the European Central Bank and Europol, to reduce fraud while continuing to stimulate the web economy.

According to the Italian bank, the new SEPA-linked payment tool will enable banks to capitalise on investments already made in its own internet banking channels, on EBAClearing market infrastructure and on SEPA investments.

 

The status quo

The pilot phase started in June this year will end next October, with the aim of fully launching MyBank in early 2013.

“We are happy that we have managed to roll out this pilot right on schedule,” says EBA Clearing director John Broxis.

“The aim of the pilot phase is to prove that MyBank works in a practical context. It means that we have handed the solution over to its users, so they can test its functionalities and usability and confirm that all is working smoothly before the go-live of MyBank in March 2013,” he says.

Broxis also explains how payment service providers, merchants, gatewways and routing service providers have started to run tests both at a national and at a cross-border level.

“The end-user experience is modelled by bank staff, but we are also planning to set up focus groups at a later stage”.

Further important steps in the structuring of MyBank have included the launch in June this year of e-Convergence, the infrastructure launched by EBA technology provider SIA to allow communication between online merchants and the bank of the to-be-network MyBank, helping developing the e-commerce sector as a whole. SIA manages MyBank’s centralised directory and guarantees participating banks interoperability and accessibility.

 

Credit before debit

EBA Clearing started implementing with a solution supporting SEPA Credit Transfer, instead of debit, saying this is a simpler and familiar payment method for consumers and merchants.

“Our decision was also in line with the strong call of the e-Payments Merchants Initiative formed by major cross-border European web retailers and e-commerce associations. They issued a position paper last year in which they specifically asked for a cross-border OBeP solution based on SEPA Credit Transfers,” said Broxis.

One of the problems linked to the SEPA Core Direct Debit, Broxis explained, is that, being the first direct debit instrument that works at a pan-European level, it comes with a number of features, rights and obligations that, in some countries, are very different from the national direct debits consumers and merchants use today.

“But it will certainly turn into a very popular payment method over the next few years, which is why the e-Payments Merchants Initiative also called for its introduction in an online context,” EBA Clearing director said.

The next step will then be to put in place a direct debit e-mandate authorisation process for MyBank, aiming to offer this functionality in the second half of next year.

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