Where is the payment system headed?

Estratégia Nacional para os Pagamentos de Retalho 2020-2022
Estratégia Nacional para os Pagamentos de Retalho 2020-2022

Banco de Portugal promises to revolutionize payments in our day-to-day lives by redefining the payment system. In three years’ time, all cards will have contactless technology, in order to encourage the use of this form of payment. Steadily, Portugal is moving to phase out payments with money on low-value purchases.

And this is just one measure of a broader set of actions foreseen in the National Strategy for Retail Payments 2020-2022, announced by Portugal’s central bank.

Retail Payments: The 2020-2022 Goals

With this strategy, Banco de Portugal intends to contribute to implementing a secure, efficient and innovative payment solution in the Portuguese market, promoting its widespread accessibility.

The central bank is not alone in looking forward to a more financially cultivated society that will reap the benefits of digital transformation. Changes will seek to work within a broad regulatory framework that promotes innovation and efficiency and the adoption of safer payment solutions.

  • Cards and terminals will be contactless in 3 years

The banking supervisor intends to promote a more comprehensive use of contactless technology in the national payments market.

In line with developments in other European countries, it also aims to promote its use in low-value operations as an alternative to cash.

Currently, about half of the cards are contactless, but the goal is that in three years all bank customers with a payment card will have this technology incorporated. For this, it is also necessary to expand the range of the automatic payment terminals (TPA) network that already incorporates this technology.

Contactless technology makes it possible to perform payments more quickly and simply, when compared to traditional chip & PIN payments, making the shopping/payment experience more convenient for the user.

It also allows for safer payments, given that the payment card is always in the customer’s possession during the transaction. Both merchants and users agree this landmark decision by the central bank foresees an even greater change in payment habits for the future.

  • Fewer checks

The central bank will identify the legislative diplomas that impose or privilege payments by check and evaluate alternative forms of payment more efficient to its use.

The goal is not to end checks, but to create a payment system where that is not the most effective means of payment or where barriers remain that hinder the use of other means of payment.

National Strategy for Retail Payments 2020-2022

  • Merchants required to accept at least one form of electronic payment

The aim will also be to assess the feasibility of promoting a legislative change that imposes the obligation of companies to accept, together with cash, at least one other form of electronic payment instrument. Currently, companies are only required to accept payment in cash and may refuse every other form.

  • Promote immediate transfers

Banco de Portugal aims to encourage the widespread use of immediate transfers, in line with ongoing European initiatives.

To speed up this process, a national database will allow the association between an IBAN and the mobile phone number, email, civil identification number or tax identification number, in order to facilitate the use of immediate transfers.

  • More direct debits

Direct debits are a payment service that allows the customer (the debtor) to make periodic payments through an authorization, previously granted to the creditor.

They allow the customer to make any payments that result from long-term contracts or are of routine nature: for example, water, electricity, telephone, gas, insurance, home rent or instalments resulting from the purchase of goods on credit.

For Banco de Portugal, however, the use of direct debits in Portugal still has a lot of ground to cover. The central bank sees this as an opportunity for traction amongst Portuguese population, that still cringe at granting creditors with this level of clearance to access their bank accounts.

  • Safer shopping

The strategy envisages the adoption of strong customer authentication mechanisms in e-commerce (communication and technical changes) for safer online purchases.

In addition, the document provides for implementing strong authentication mechanisms that improve the usability of payment solutions, such as biometric elements, such as fingerprint or facial face.

  • Streamline payments to the State

The strategy also caters to the needs of the state. Electronic payment solutions streamline payments to the Public Administration (namely taxes), especially those of higher value.

These are the major changes presented in the National Strategy for Retail Payments 2020-2022. Can we conclude that the future of the payment system is digital?