Electronic payments are constantly gaining ground in our country in relation to cash, which, however, is still the dominant method of payment.
This trend, which was strengthened both internationally and in our country due to the pandemic and the restrictive measures that were implemented, is estimated to continue in the coming years. This shift to electronic payments creates the need for them to be completed immediately on all days and hours of the year. Simply put, an electronic payment must be completed, cleared, just like when we pay in cash. This will happen throughout Europe and in our country from December 10.
But how did we get to this point? Who are all the actors involved? What should traders and consumers know? George Korfiatis, Deputy Director of the Payment Systems and Settlement Division of the Bank of Greece (BoG) and Project Manager of TIPS for the BoG answers questions from RES / EIA:
1. What are direct payments and why are they an innovation? Are they applied in Greece?
Direct payments are about adapting electronic payments to the current need of consumers for digitization and innovation. The benefits of cash, ie the ability to make our transactions in real time, with simultaneous and final settlement all days and hours of the year, now come in the interbank payments made between two accounts.
This need has resulted in the creation of many different direct payment solutions across Europe. The IRIS service has been operating in Greece since May 2017, through DIAS. For transactions by mobile phone (IRIS mobile payments) there is a limit of 500 euros per transaction while for transactions via e-banking the limit increases to 12,500 euros, with operating hours and working hours and days of credit institutions, ie daily 08:00 – 16 : 30. The truth is that the development of different national solutions has created a fragmented payment landscape across Europe that “stifles” innovation and hinders citizens’ access to it. Imagine not being able to roam on mobile when traveling abroad – it is a similar example of interoperability without pan-European accessibility.
The Eurosystem is fully aware of the dynamics of direct payments and the possibility of becoming the “new regularity” in the euro area. Thus, in November 2018, it launched the TIPS service (TARGET Instant Payment Settlement), contributing catalytically to the implementation of innovative payment solutions with emphasis on direct payments. With this move, the Eurosystem essentially contributes significantly to avoiding the prevalence of national solutions in direct payments. TIPS allows Payment Service Providers (credit institutions, FinTechs, etc.) to offer their clients pan-European funds transfers, continuously and in real time, 24 hours a day, every day of the year. In our country, from December 10, 2021, eight Payment Service Providers will participate in TIPS, which correspond to 97% of the total payment accounts in Greece.
2. How do they affect the payment routine and what are the benefits for consumers and traders? Tell us an example of buying in an eshop and in a store, what is different about TIPS?
Direct payments will dramatically increase the speed with which payments are made. Existing electronic payment infrastructure, while enabling payers to initiate payments at any time, makes the payment amount available to the payee, no later than the next business day. Instant payments make the amount available in less than 10 seconds, which is faster than it takes to approve a payment by debit or credit card.
Let’s see how this translates into practice. The customer in a physical or online store will be able to buy a product by paying immediately. All he has to do is scan a QR code or use his online banking. If it is in the physical store, it means that it could potentially avoid the cash register queue. At the same time, he will receive the electronic receipt of the purchase directly on his mobile phone. What are the benefits? The consumer makes the payment easily, without the risk of cash management and without the risk of fraud involved in a card payment. The trader sees the payment directly (in seconds) in his account, which leads to a reduction in the risk of non-payment of goods and services, as well as to optimizing working capital management and minimizing the need for financing.
3. Use direct payments for payments to the State, such as taxes, road tax, and DEKO? If so, what does the taxpayer gain and what does the State gain?
Direct payments strengthen the trust between the citizen and the State. The dissemination of direct payments will facilitate the daily lives of citizens by modernizing their interaction with the State and will enhance its effectiveness. It could also be used in cases of transfer payments such as support allowances for the financially weak and afflicted. In this way, citizens’ confidence in both payment solutions and the role of the State is expected to be further strengthened. Direct payments will help reduce unnecessary bureaucracy and tax evasion, ultimately leading to a state that serves its citizens more effectively. If we can reduce unnecessary bureaucracy we reduce inequalities, helping the weakest. In this context, and focusing on the positive aspects of digitization, such as informing the citizen immediately about a payment, the great benefit for the State, as well as for the citizens, will be the improvement of the services offered.
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