Perspectives on Ca-Libra # 1. Getting rid of three smokescreens

This week the world has witnessed the announcement by Facebook of Calibra, a digital currency wallet and company. The wallet holds Libra, a virtual currency, with the idea to be used globally. Its distribution and use will be further promoted, organised and executed via an association of partners, called the Libra-association. The information pack (download here) also outlines more technical details on programming languages, future plans and committment to regulatory compliance.

Immediately thereafter, a storm of analysis emerged in order to understand the initiative. Quite some politicians and regulators are eager to quickly respond and that is completely understandable.

Facebook is not just the grocery shop around the corner, dabbling about with some new technology. It has allocated significant resources to the development of Libra. With a customer base of at least 2 billion (close to 25% of the worlds population) it is an entity that in itself acts as a world-wide platform and does not need others to achieve a network effect.

Perspectives as the approach for this series of blogs
As the Libra-initiative can be viewed from many angles, I plan to write this series of blogs and label them as perspectives. It's always helpful to view things from a couple of angles and that is precisely what I intend to do. This means we will be looking into definitions, regulatory regimes, business case and previous historical analogies. And as we go along I will take stock of developments and responses.

As you may notice, I will be judging Facebook by a very high standard. The reason for that is simple. If an organisation has so many resources available, I expect them to come up with careful, consistent and accurate thinking, wording and technology. And as a sneak preview: this is not what we got over the last week.

While the maturity of the exercise may look impressive to some observers, the huge inconsistencies and home-brewed interpretations of what a blockchain is cannot be a coincidence. We can see an announcement that Calibra will become available in 2020, while the state of thinking mid 2019 is 'early in the process'. This is accompanied by a PR-smokescreen on cryptocurrencies, that doesn't help our understanding the effort.

So the very first challenge that exists, when discussing the Ca-Libra virtual currency initiative, is to separate fact from fiction and to be precise in terminology. That is why this first blog seeks to get rid of the three biggest smokescreens that we were facing this week.

Smokescreen #1: libra association is not an ecosytem but a payment association with added functionalities
If we start with the source of payments revenue for Facebook, this originally all boiled down to payments related to Flash games (in 2015). But technical problems in Flash would hit their revenue. So they quickly understood the need to be more flexible and to be able to operate different business propositions and solutions. Therefore they moved towards licenses in the US (cash via messenger) and in Europe. They also moved the US e-cash system to France and UK, but announced 2 months ago that they would drop it in Europe per June 15, 2019.

And now, per June 18, 2019 Facebook essentially announce to re-up their game, but not with electronic euro's but with a self-invented world currency, backed by other currencies and liquid financial instruments. To blow away the first smokescreen, let's analyse the difference between the old Facebook e-cash or e-money with fiat currencies and the new Facebook libra, as distributed by Libra Association.

What we can see is that Facebook seeks to move the fiat-currency of its e-money system out of its direct control and responsibility as an issuer. Facebook Payments Inc is currenlty the entity that is responsible and guards all the relevant rules with respect to working with the e-currency. But in the new construct Facebook Calibra is merely one validator that can use the Libra-system under open source rules. So we see the fiat-e-currency companies of Facebook stepping aside and a new Libra association entering the playing field. At the same time, the technology shifts from in-house proprietary systems to an open-source codebase in the hands of no one in particular.

Top organisation	Facebook Inc	Facebook Inc
Type of asset	Virtual Currency	E-money
Denomination	Libra (self-invented)	Pound, Dollar
Issuer / Currency creation	Libra ‘association’	Facebook Ireland
Nature of issuing	No direct issuance to customers. Direct issuance to validators.	Direct issuance to customers Direct redemption at issuer
Secondary market	Secondary/tertiary market with reselling - disbursement via exchanges/other institutions	No reselling of e-money.
Fee structure for Reselling	Unknown, but most likely the price for validators is unequal to that for exchanges or customers.	Issuance at par and redemption Of full amount minus some cost
Issuing without Customer demand	Currency base may change without actual demand of customers.	Issuance as part of buy-transaction of the customer
Reserve pool	100% reserve in basket of currencies	100 % reserve in Denominated fiat currency
Technology	Open Source community	Proprietary
Control and use of technology	Unknown contractual arrangements and safeguards for entities in the value chain	All usage governed by contract with issuer and financial law

Bringing the currency to the public or ducking the issuance responsibilities?
Of course one could frame the above shift of roles as bringing a currency to the public. Facebook is however dumping its core-responsibilities with respect to shaping and operating a currency-system and moving a lot of activities to an ill-equipped new Libra association with no track record at all.

While Calibra states that it will comply with all relevant legislation, we can see that the actual information of the Libra Association in this respect is pretty thin. They issue a currency-like digital token/record but do not explain which legal regimes would apply. Also their actual claim as whether they are a not-for-profit organisation does not align fully with this twitter thread outlines that it is a regular company with wider statutes.

If it looks/talks/qucks like a payments scheme, it is a ...?
In payment terms - which is what Facebook says to be aiming for - the Libra Association is essentially a payment scheme. Such a scheme defines the rules for an ecosystem that wishes to transact electronically. Examples are Visa and Mastercard, organisations that need to abide with a lot of rules in order to avoid them becoming a place of illegal cartel-agreements on price and illegitimate contract terms to end users.

With payment schemes we have huge and long discussions and deliberations of price levels. There is the obligation to ensure that there is no obligation to buy processing power from the scheme itself. There are policy views and obligations that schemes should be interoperable and open. And then there is a mountain of rules that specifies how to use the brand and which technical criteria must be complied with in order to be allowed to connect to the system.We find very little of this in the current papers on the association.

What makes this payment scheme special, a payment-scheme-plus ?
What sets Libra apart from Visa and Mastercard is that the association is effectively an issuer of the currency. This means a blurring of operational roles and scheme responsibilities, which is generally considered as a bad practice in governance terms. But what is most striking is that the membership rules are not geared towards controlling/monitoring and creating a safe and sound currency. We find no mention of specific prudential licenses or governance/quality certifications required for different roles under the scheme and as a member (or shareholder).

The only thing we read is: we seek to expand, we want to incentivise the use of the token and for this we don't want the small players in the market. We aim for the big players with market power. We separate the wholesale participants from the retail participants (allowing for price upticks). And then - the devil is in the details - the customer pricing format is based on a FOMO-principle (do you want your transaction processed: please throw in some more gas).

I am curious what reasoning Facebook and its founding members have had in this respect. The whole association setup is ostensibly aimed at market dominance, without proper governance safeguards and without any guarantees as to operational security and safety and soundness of the system. If I were a competition regulator I would jump at the opportunity to wait for the founders to sign the participation agreement and deliver a letter to their doorstep, next day, to start investigating the market abuse that might be at play here.

Governance claims and reality: a scheme is a supertanker without effective governance
I have been reading all the statements on the public structure of the association with a lot of amusement. Facebook is claiming that it will bring the intellectual property into the public domain and of course all the members of the association have a voice. So this seems to be well arranged with room for consultation, discussion and changing course.

The reality is completely different, as everybody in the banking sector knows. There is sufficient experience with clearing houses and associations (even with a relatively small number of shareholders) that are unable to essentially change course, once set up. Large associations like EPC, Visa, Mastercard, are effectively orphans without parents. Stakeholders are always irritated about the fact that these associations set their own course and associations always claim their shareholders have no vision. Bottom line: if you transfer your Libra-currency design into this domain, it is quite likely to be persistent. So don't expect any radical changes after this one is live; it will be gradual evolution from here onwards.

Not just a scheme for the payment instrument, but the unit of account (and a security as well)
There is another difference between Libra and Mastercard and Visa that I would like to highlight. The regular payment schemes seek to transact efficiently, taking existing currencies/structures as a basis. But this scheme introduces a new currency itself and regulates this currency via the management of reserve assets. It demonstrates that the aim of Facebook is to design its own Facebook buck, push it into the public domain and then profit from the benefits of having their own unit of account in place, while hiding behind the members and the open source philosophy when things go wrong.

A specific element in the scheme is that the unit of account is backed by a basket of currencies and financial instruments. Effectively this means that if you buy one Libra, you buy a couple of foreign currencies. Or put differently: you participate in an open ended money market / investment fund. And you use the digital representation of your participation in this fund as a means of payment.

This is a bit of double work as this means the association and the scheme are not just subject to payments legislation but also to investments/securities legislation. But it is legally possible: the payment would legally not be a discharge of obligations via a financial payment, but via a payment in kind (currency basket).

So what do we see here?

The Libra association is a mere manager of the governance and operational arrangements and activities that come with using the virtual currency Libra and participating in the Libra scheme. This Libra scheme is a private and commercial arrangement which:
- defines a unit of account for a new virtual currency: the Libra,
- defines the asset mix that backs one currency unit,
- lays out the distribution and management rules of the currency units and reserve funds,
- lays out commercial rules and does a private placement to further promote the use of the Libra by giving them away (for free or at a discount).

The Libra association itself will be steering future technical development and is charged with the project goal to move the whole infrastructure towards a permissionless setup. This is completely impossible (as these associations act with oil-tanker dynamics) but that brings us to the next smokescreen.

Smokescreen #2: Libra is not a blockchain, not a cryptocurrency but a digital virtual currency /financial instrument
It was fascinating to see that the carefully crafted and prepared introduction of the Libra sought to position it as blockchain and as a cryptocurrency. This creates a lot of noise. Also, the use of similar words for different concepts and organisations is confusing.

We should distinguish between:
1- Calibra, the organisation, a 100 % subsidiary of Facebook, acting as a validator node,
2- Calibra, the branded digital wallet developed by Calibra to carry the Libra virtual currency,
3- Libra, the digital currency that will be in the Calibra wallet
4- Libra, the reserve pool of assets that backs the digital currency,
5- Libra Core, the Network or 'blockchain' that forms the core operating technology for clients and validators,
6- Move, the programming language developed for the Libra Network.
7- Libra, the association governing, promoting and executing the virtual currency system,
8- Libra members, big commercial players that may join the Libra association, provided that they are a validator.

What struck me in the communication is the flagrant re-definitioning by Facebook of the concepts blockchain and cryptocurrency. Facebook really wants to be seen as doing some cryptocurrency stuff. But they don't. Just for fun I will be comparing the Facebook FAQ with the wisdom of the Wiki-crowd.

Libra is not a blockchain
Facebook succeeds in not mentioning the facts that blockchains are, by definition and terminology, a chain of blocks, linked together. Wiki has it right.

What is a cryptocurrency exactly: native currency of an open blockchain
Wiki states, that the decentralized control of cryptocurrencies works through distributed ledger technologies, typically a blockchain. Personally I would not have mentioned those ledgers as the blockchain is not so much a ledger as a journal (log roll of transaction entries). And apps are creating the ledger feeling for blockchains. But let's look at the wording in the image.

The wording of Facebook is interesting. It speaks of using cryptocurrency due to the use of strong crypto. This leaves out the issue that cryptocurrencies may be native to blockchains (as in chains of blocks). And then Facebook moves on to cryptocurrencies being built on blockchain technologies.

Which is true of course, but if I use all the parts of an air plane to build a firmly grounded restaurant, this doesn't mean that my restaurant is still an operational air plane. It is built on air plane technology, but the wording matters. Facebook puts up a smoke screen here to position itself in the blockchain community.

Libra is not a cryptocurrency
The funniest part of the Facebook FAQ was the mere statement that the Libra is a new cryptocurrency designed to have a stable and reliable value. Coming from a perspective where cryptocurrencies are inherent elements of open, truly decentralised permissionless blockchains, this is an interesting statement. It demonstrates that Facebook wishes to be a cryptocurrency but it isn't.

The text above also shows that Facebook has its eyes on the stablecoins that are around. These stablecoin are, in my view, privately issued currencies, with the goal of a fiat peg. The stable-'coin' is used a lot in the cryptoworld to facilitate fiat/crypto exchanges in times when the financial system is not online. The fact that this currency is used a lot in the cryptoworld, does however not make it a cryptocurrency in the terms of an inherent currency of an open permissionless blockchain.

Libra, what is it then, in regulatory terms?
My conclusion, after quite some pondering and tweeting is the following.

Libra is a privately issued and distributed digital  and virtual ‘currency’, that is intended to function as a means of payment. It is not a true currency because its actual composition/counter value is a basket of fiat-currencies and financial instruments. It is not e-money as the Libra is not ‘monetary value’. The digital value qualifies as a financial instrument (a mini-participation in an open ended investment fund) and is used in an open source payment instrument, to be used for payment and acquiring. Both payments and securities legislation apply, as well as the relevant competition and consumer protection rules. 

The Libra association is the scheme owner and scheme operator of the Libra virtual currency. This currency/investment can only be bought directly by members of the Libra association. Other entities or customers must revert to second tier players, exchanges or peer-2-peer applications. Technical development of applications is encouraged and rules to secure the application by contract or licensing seem to be absent.

Due to the blending of scheme and operations, the Libra association cannot really be viewed as the beginning of a proper payment scheme. Functionality, pricing and membership rules make Libra and the Libra association an easy target for consumer/data protection and competition supervisors, bank supervisors and securities supervisors.

Smokescreen #3: Libra is not a charity exercise that seeks to operate a public good but a commercial enterprise
A huge amount of effort has gone into convincing the public this week that Libra is all about helping the rest of the world. Getting more inclusive finance. Making payments faster, easier and such. It is striking that these statements mirror the claims that originally come from the Bitcoin community or from the Fintech community.

Of course those claims strike a chord. People may well be fed up with their banks and the perception of banks with slow procedures and expensive fees for foreign payments are an easy target for PR-people who want to position their initiative in a friendly way to the public. Who doesn't want to take on the banks and improve the world.

Commercially, the thinking of Facebook is most likely to be that it needs to counter the We-chat Pay dangers and all other Fintech movements that lead to easy in-app payments. Payments will increasingly be an afterthought and harvesting the data in those payments will allow for even higher ad revenues, as Facebook will see what works and what doesn't. Interestingly Facebook did not increase the speed of its current developments; it chose to move up the value chain, towards setting up its own currency and hoping that it will work as a unit of account (and may stay in the system for long).

Of course, the move by Facebook is a big signal. But we must note that there are still also other players that could make the same move. Which would lead to some form of a duopoly (as with Mastercard and Visa) and the need to agree on interoperability or on open access to infrastructures of the big techs involved. I did not come across this notion a lot, so far.

The public good narrative: unbelievable coming from Facebook
What struck me most, coming from Facebook as a centralised company that is not interested in respecting democracies and laws written by those democracies, is the sketch of opportunities in the White Paper. And do have a look at the phrasing on public good.

Given that by now I hope to have convinced you that the design of the Libra association and its constituency is far below the usual standards to be expected from payment schemes, you can imagine that I was unable to reconcile these laudable beliefs with the actual proposition.

If you truly wish to create a new public good, a new worldwide currency, it is not impossible to deliver this with private sector entities. There is a whole range of public policy theories (delivery of universal services or service of general interest) that can help out here. But putting the richest, biggest enterprises of the world in one room, to distribute a world currency/investment proposition without proper safeguards or recognition and qualification of the activities of the issuing association is not the way I would go about.

Facebook cloaking its plans in cryptoterms,but why? 
Let's face it. This whole complex open source, cryptocurrency story that Facebook has published is not necessary. If Facebook Payments Inc or Facebook Ireland wishes to change its currency mechanism towards a different setup it could do so itself. Why is there a need to involve other stakeholders with a trendy and hip storyboard on decentralisation, blockchains, cryptocurrencies and such?

It can't be a money issue. Facebook has sufficient resources to fund the whole exercise itself. And the quality of the exercise could then convince other commercial partners to join. So why the need to step out of its digital currency issuing role itself?

To me it is pretty clear that Facebook seeks to move up in our lives. Doing our financial business is not enough. It is all about entering our mind at a deep level. At the fiat currency level. We should think prices in terms of Libra, not in terms of fiat currency. And there is a good power reason for it. Because as long as Facebook uses digital fiat currencies it can be under the rule of the government that issues it. Now, by having a basket of currencies, Facebook can kick out currencies/countries if need be. State regulators and supervisors lose their power.

In addition, Facebook chooses to limit its own role and hide behind am Swiss association, to cover the fact that they don't want to take the responsibilities that come with issuing a worldwide association. They are suckering/forcing partners into joining this programme, without alerting them to the obvious violations of competition rules that may arise. They leave out all mentions of safeguards and contractual arrangements that can aid in ensuring operational integrity for this worldwide currency. Rather they throw the technology in the public domain, knowing well that this means that it's use cannot be fully controlled.

It is no surprise why politicians and regulators were keen to act. Their immediate response was that this was a further extension of an a-moral company that stops at nothing. As Maxine Walters outlined in the US, when asking Facebook to stop further development:

Reversing the statements to see what's hidden in plain sight: ruthless selfishness
As a thought exercise I was wondering. If they claim that it is a blockchain and cryptocurrency, while essentially it isn't, shouldn't we also reverse the other statements to see what is truly happening here.

I leave the result for you to ponder and thank you for bearing with me in this ultralong blog.
Up next I expect blog 2 to be about EU-definitions and legislation.

THE THREAT
As we, as Facebook are in it strictly for our own goals, we intend to hide our true intentions and motivations so we can fool the community and our partners in the ecosystem to go along. 

We believe that many more people should buy financial and identity services from our company specifically, even when doing so will come at a higher cost than the available alternatives. 

We don't believe that people have an inherent right to control the fruit of their legal labour. 

We believe that global, open, instant, and low-cost movement of money will create immense economic opportunity and more commerce for us in particular. 

We believe that people will increasingly trust centralized forms of governance. 

We believe that a global currency and financial infrastructure should not be designed and governed as a public good. 

We believe that we don't bear a final responsibility ourselves to help advance financial inclusion, support ethical actors, and continuously uphold the integrity of the ecosystem.

PS. I have changed the definition on June-24, to reflect that the currency is a mini-investment fund which is used in an app/ecosystem that would qualify as a payment instrument. Definition blog will follow.

Interchange fees: do the FED know what they're up to...?

I've just read the FED's speech on interchange fees. Most striking, in my view, was the conclusion that this is a complex issue. Now, the FED are good thinkers, and if they say something is complex, it means that even they can't make something out of it. So if I read the text below with that in mind:
In light of the novelty and unusual complexity of the issues raised in this rulemaking effort, my colleagues and I are very interested in reviewing the full range of comments offered on our proposed rule and are reserving judgment on the terms of the final rule until we have the opportunity to benefit from these comments.

This just looks as if the FED are saying: Sorry, but even we don't know what to do here. So my guess would be that they go for an easy, less controversial solution. Because in the meantime, I noticed in the SEC filings that Visa and Mastercard are already preparing for a large legal battle (and have agreed how to share the burden between them). And from the above, I reckon the FED is not looking forward to more complexit or novelty.

Mastercard to reconsider ad valorem based fee plan in UK...

See the website of the British Retail Consortium to read that Mastercard planned for a new approach to debit card interchange charging but was stopped by retailers...

In the UK retailers currently pay a fixed fee on debit card transactions regardless of the value of the transaction. Rates range from 6 pence to 18 pence, depending on which card it is and where and how the transaction occurs, but the fee on a £20 transaction is the same as for a £100 transaction.

For this new debit card MasterCard wanted to introduce percentage, or so-called ad valorem, fees. It wanted to charge a fixed fee of 3.5 pence plus 0.15 per cent of the purchase price.

It's intruiging: the attempts of debit card schemes to go for the ad valorem fee structures for payments where actual value (in terms of cost) does not influence the cost of the transaction....

Dutch SEPA website online

This week De Pers points to the Dutch SEPA.NL website, informing the public about SEPA. The site has got a bunch of material and backgrond information. Mostly in Dutch, but there's also a English page with info on the migration to SEPA in the Netherlands.

Yes, there is an interbank compensation mechanism (interchange fee) for POS in the Netherlands

For some unknown reason, I noticed that quite some websurfers seem to be interested in the question whether or not an interchange fee (for POS) exists in the Dutch retail payment systems. Well, the answer is that there are interchange fees for:
- direct debits
- bill payments (acceptgiro)
- interbank usage of ATM's
- and an interbank compensation mechanism (not a literal fee) for POS.

As for the latter mechanism, the NVB explains in its reply to the competition report of the Commission:
From an outside view it may seem that the Dutch POS scheme PIN indeed operated or operates without an interchange fee mechanism. But this was and is not the case. In fact there has always been an “implicit” interchange fee till March 2004. Card issuers received the net financial result from the acquiring operation of the only acquirer Interpay/BeaNet, to cover costs on the issuer’s side. From the moment on that the sole acquiring by Interpay/BeaNet ended (March 2004) and individual banks became acquirers for POS transactions, an explicit cost based interchange fee from acquirer to issuer was introduced that forms part of the cost base for acquirers. The underlying interbank agreement was notified to the Netherlands Competition Authority (NMa). The NMa however doubted the necessity of a multilateral interchange fee mechanism. Therefore the interchange fee structure will most likely be redesigned and be replaced by a system of bilateral interchange fees. The discussions with the NMa on this topic are ongoing.

Now, why would this be interesting to the readers?

I guess that it boils down to the current hefty ideological debates on whether or not interchange fees would be necessary in payment systems. While the answer is a clear yes (most certainly to get separate initiatives all aligned to become interoperable and standardized) the regulators seem to forget about the evolution of payment systems. And wish to abandon interchange fees to the past. So they keep on continuing the myth that it is possible to do payments without compensation mechanisms and keep referring to the Dutch situation as an example.

Although every regulator might learn from studying and trying to understand the industry, they also do have a fundamental right not to take things for granted and the right to climb the learning curve from scratch by themselves. In that spirit, I would encourage those interested to start studying the situation in payments via the phone in the Netherlands. At present we have a number of initiatives going. Some use the phone and a voice-mail application, others such as Payter use NFC. And Minitix is a combination of both, while a number of trials is pending.

While the newspapers this week all announced that in the future we would pay with our mobile rather than with e-purse, let's imagine what will happens if all these initiatives grow. Suppose we end up with 3 types of schemes. The consumer and retailer lobby organisations will then say it is too messy and unorderly. You can't expect shop owners to accept all those schemes: they need to be interoperable. And consumers would also benefit from one m-payment technology rather than having to choose from three.

What will happen then is that the initiatives will work out some interoperability agreement allowing one application/device to accept all 3 schemes. But then there is the question: which scheme had the relation with the retailer and which with the customer. And how are the schemes going to be compensated for their efforts in building their customer base (which will now be accessible to all involved). Particularly if the market coverage of the schemes is different:
Scheme A: 30 % consumers ; 30 % merchants
Scheme B: 10 % consumers ; 60 % merchants
Scheme C: 60 % consumers ; 10 % merchants

The answer to this economic puzzle is of course an interchange agreement. Yet, if regulators would insist on forbidding it, they force the market into a situation where no single technology will serve the whole market in an interoperable way. Which is beautiful from a competition perspective, because there is lots to choose for all. But perhaps it may be less convenient from a customer and efficiency-perspective.

So if we would call interchange fees a 'hidden tax' the alternative is an 'open and visual tax' consisting of the burden for merchants and consumers to have a higher number of different, not-interoperable payment instruments in their wallets, on their phone's and on their pc, in order to be able to pay for all the purchases they'd like to do (and to be able to accept all the payments from consumers). That is in my view the bottom-line policy choice in the interchange debate.

And if it's the hidden cash we're after, why not start eliminating the hidden tax (or stealth tax that Dave Birch calls it) that is out there for cash?

Interchange complaints are just a call for lower merchant fees..?

Here's an interesting article on the Javelin Strategy and Research site. It ends with the open remark that all the fuss about interchange payments, made by retailers could be merely those groups posturing for lower fees by whining about high charges for merchants and disruptive interbank agreements.

Now, if indeed all this hidden tax for merchants, interbank agreements and huge profit would be so terrible to retailers, why dont't they set up a retailer based card scheme....? Because in the end accepting payment with cards in a shop is a make or buy decision.

If you don't like the brands and fees out there, just do it better yourself. And then, when the argument comes that it would be impossible to reach all consumers with your single retailer card, or that it would become a messy world if each retailer would issue its own card: well, that would make one really understand what it is exactly that you as a retailer are paying for, when you decide to go along with bank issued cards.

Banks have solved a complex cooperation, coordination and reachability problem in the cards-space and do not just use their expertise for themselves (by limiting the interbank card usage to ATM withdrawals) but also allow their consumers/merchants the benefit of using that same card for paying in the shop. But then, when push comes to shove, all the users can do is be unhappy with the pricing (as if anything in the world would need to be provided for free).

So indeed, I would agree with the Javelin remark. It is high time for either a retailer based third card scheme in Europe or a more modest and less agressive approach by retailer lobby organisations.

UK banks under fire for overdraft penalties..?

The Dutch AD.nl has the news that there will be test case before the UK courts as to overdraft penalties. This relates to Tom Brennan's litigation on that matter. Despite an 80 minute judgment, rejecting his arguments he will take the matter up with the High Court.

AD also referred to the last week's announcement from the Office of Fair Trading that it will push for a High Court declaration to find out whether the unfairness rules contained in the 1999 consumer contracts regulations applies to overdraft charges.

Brussels agrees on roaming regulation and closes competition investigations ....

Sometimes, the news comes in bits of pieces and only makes sense if you put the two together on a later date. Take for example the EU regulation to establish more modest roaming fees for mobile operators. At last the mobile industry stopped battling the initiative, understanding that it wouldn't make sense, given their pricing practices in the consumer domain.

And then a couple of weeks later, the Commission suddenly announces that it drops the competition investigation for mobile operators. Quite unusual as the FT notes:
The decision to draw a line under the high-profile cases is unusual because EU competition regulators rarely stop such inquiries without either securing a settlement or imposing a fine.

So where was the deal/settlement...?

My guess is that one and one makes two. The agreement between Commission and mobile operators clearly was that if they stopped resisting the roaming regulation, the Commission would stop the competition investigation in roaming.

Now, let's compare that deal to the situation in the banking sector. Already for 5 years there is the regulation that bank chargs should be equal (whether paying inside or to another euro-country). Which is effectively worse than the current roaming regulation (that allows for some higher prices in cross-border phoning). And at the same time there are still all kinds of threats and rulings to be expected with respect to interchange fees (the bank's equivalent of roaming agreements). With no one ever considering to drop those actions...

So why would it be that the Commisison continues to the debate on interchange rulings and interbank practices while completely dropping the roaming investigation?

My guess is that the Commission and EU Member States' governments, rationally distinguish between industries that are making them money and those that aren't. Any government would of course be more likely to be friendly to an industry that makes/has made you a lot of income (by buying some air/frequencies to do phoning) as opposed to an industry that is constantly ripping you of income (by killing cash seigniorage which is a nice source of government revenue).

Perhaps just another one of those cases of Schizophrenia?

Answers to MP-questions on liability shift

While in considerable parts of the world chip and pin (and liability shift) is underway, the Dutch developments are a bit slower. Our move to EMV is however well discussed within the National Platform on Payments, in which in 2004 parties concluded that you cannot reasonably do a liability shift if there is no EMV-compliant terminal/infrastructure available.

With some new EMV terminals coming on the market, EMS decided to start moving towards including a liability shift in the retailer contracts (for credit-card payments). And Dutch retailers, that are keen on making every penny possible in negotiations, thought it would be a good idea to whisper some questions into the ears of an MP about how incorrect this liability shift thing is. And that the actual agreement in the National Platform would have been that rather than having a range of EMV-terminals in the market, it would be necessary for more than one terminal-provider to be active in the market. And only then would there be a liability shift.

So this week Minister of Finance answered to these questions by explaining that he had indeed been made aware of the contents of the letters of EMS to the retailers. Yet he did not wish to confirm the retailer interpretation on 'agreements in the national platform on payments'.

The answer of the Minister of Finance is a delicate 'no, you're wrong' to MP Vos. Delicate because Minister Bos is the leader of the Labour Party, while MP Vos is one of the newcomers for that party in Parliament. And 'you're wrong' because there is a free market for EMV-compliant terminals right now (which will be further expanding quickly in the future) and because in today's society retailers and acquirers are free to conclude all kinds of contracts they like.

What he forgot to mention is that also in a formal sense a commitment not to introduce a price structure is impossible, because such an agreement would have constituted a price/cartel agreement. And the National Platform, by its statute, is only there to discuss payment developments and not to do price-bargaining or arrange for price-agreements for any of its members.

The answer of the Minister is that given this freedom of contract and all other variables in the credit-card game (retailer segment, segment specific controls etc), it is not by definition the case that retailers will charge the cost of the liability shift to consumers (and I would add that it is similarly unlikely that they will pass on revenues from the liability shift and translate it in a lower price level, due to lower fraud costs...).

So, the one question that remains is: is the retailer strategy to continuously do public price bargaining by asking questions via MP's in parliament an effective one, or does it in the end just demonstrate penny-wisdom?

Rabobank adapts Minitix to penetrate m-payments market

See the news of last week on zibb.nl and Emerce, explaining that Rabobank is adapting its e-purse application Minitix (10.000 users and 100 shops) for use with the mobile. Ths user may now load the purse with 99,99 euro (this was 10 euro) and then pay for all kinds of digital stuff, that you usually pay with the mobile phone. Paying with Minitix can be done by using a shortcode.

The benefits are really there for the merchant; they are now glued to the mobile phone companies which only allow for payments of 1,50 euro max and then take a slice of 40-50 % as all-in merchant service fee. So Minitix add to the range and competition. Of course they will outsmart the sms; that is not so complicated: see the list of payment mechanisms (and cost) to buy a ringtone of 99 eurocent (with a popular radiostation radio538) are:
- 0900 (€ 0.31 extra)
- 0909-Pay Per Minute (€ 0.41 extra)
- Click&Buy (€ 0.15 extra)
- iDEAL (Rabobank, Postbank, ABN AMRO, SNS Bank)(€ 0.65 extra)
- MasterCard (€ 0.44 extra)
- MiniTix (€ 0.32 extra)
- PayPal (€ 0.40 extra)
- SMS (€ 2.01 extra)
- VISA (€ 0.44 extra)
- Waardecoupon (€ 0.00)
- Wallie-Card (€ 0.18 extra)
- YourGift (€ 0.00 extra)

Well, whats the use of such a payment mechanism if it is not freely available across closed mobile portals? Not so much, so that's why Rabobank also focused on the Open Mobile Internet initiative (OMI). This aims for open m-portals rather then the current closed shops where customers of Vodafone can hop around in the vodafone portal but really get charged when outside that portal (with Vodafone of course taking in the kick-back fees from content-providers on their own portal).

As it turns out that the customer doesn't like this closed shop idea (imagine that the internet started with a bunch of paid content available from the start, rather than as the free web it was) even the mobile operators feel that they have to change their business model (and there may be of course a bit of a concern that competition regulators start to understand their current business model with extraordinary high merchant service fee charges). So thats why they're also in the OMI.

By the way, the Rabobank Minitix is operator and bank-independent; just the same as earlier initiatives (that may have been too early in the market): Moxmo, Digipay (read the public report on their liquidation here). So let's see if this next shot at the m-payments market will have an impact.

Retailers continue gallery play for low bank fees while overcharging consumers themselves

Last week I noted that members of Dutch parliament (quite obviously prompted by retailer-lobby organisations) started asking questions in parliament on the competition in payments and on the possibilities of price increase as a result of SEPA. Which showed that retailers succeeded quite easily in (hijacking and) narrowing down complex policy discussions about European payments markets into an ordinary Dutch price-rebate discussion for merchants.

This week the retailers continue their battle in the Financieele Dagblad. Mr van der Broek, chairman of all retailers in the Netherlands explained in an interview that the retailer representative organisations withdrew from some subgroups of the socalled National forum on payment systems that dealt with SEPA. The reason for doing so was that the retailers found it unacceptable that the banks did not collectively wish to give a low price guarantee for future fees of payments authorisation. Not receiving any affirmative response, they concluded that it was most likely that further price hikes were upcoming and that in the end there would only be two acquirers in Europe: Visa and Mastercard; which would have to mean higher fees for everyone.

This oversimplification of reality did not go by without a comment of the Dutch banks. On their website they have provided a somewhat cool reply. In this news posting (in Dutch) they point out that the claim and fear for a duopoly in the cards market rests on the misunderstanding that retailers have direct contracts with scheme-owners rather than with all the players (banks and non-banks alike) in the acquiring market. So the duopoly is nowhere near in sight and will never become a reality.

They further continue - as a part of their explanation of the six most common misunderstandings about POS-authorisation fees- that already at this very moment retailers can choose from a wide number of banks and acquirers for pos-authorisation processing. And research by the Dutch competition authority demonstrates that this competition works and leads to lower fees.

In their statement the banks also politely hint at the oddness of the retailers price guarantee question, by explaining that it is forbidden as a collective of banks to do joint price setting. And that it is not proper conduct to asks banks to committ to such behaviour nor to draw conclusions from the fact that banks do not answer to this question that shouldn't even be asked in the first place. They point out that it even more incorrect to assume that the silence in reply to this question thus means that fees will become higher.

My personal viewpoint is less polite. Some 5 years ago, the retailers were among the loudest bunch in the audience to want the existing price-cartel/monopoly of banks (for authorisation of PIN-transactions) to be eliminated. And they were right in doing so. They got exactly what they wanted: banks were fined and all contracts now need to be bargained by retailers at individual banks. Retailers even got one cent discount as a part of a separate agreement with banks to set the past aside and work towards efficient payments in the future. So they dismantled the existing monopoly in exhange for competition. But instead of competition the retailers now appear to want a Dutch domestic bank monopoly back to fix or set some even lower prices for the future.

On their website, the Dutch banks once more outline that SEPA is not a banking party but the result of political pressure on banks (Lissabon agreement in 2000), leading to standardisation by the European Payment Council on the one hand and to legislation (Payment Service Directive) on the other hand. So the banks reject the retailer suggestions that SEPA is brought on the public because the banks want this so much. The banks also ask retailers to join in and do their bit: accept all panEuropean payment brands so that all Europeans may be able to pay efficiently at the point of sale.

And finally the banks point out that irrelevance of the whole issue brought forward by the retailers. They clarify that in the Netherlands it is possible to surcharge at the point of sale. So the retailer can choose to ask a fee from the consumer if a certain payment brand (or cash !) is a bit costly. Which would solve the whole problem of bank fees in the first place.

And with that last explanation comes another fine example of interesting retailer behaviour. The banks outline that 25 % of the Dutch retailers ask a 25 eurocent fee from the consumer if he chooses to use the direct debit card over other payment instruments for low value payments. While the bank fee for this transaction is only 5 cents, this does raise an additional question as to why retailers so heavily overcharge the consumer. It can't really all be 20 cents for terminal or telecommunication cost...

The battle for ABN AMRO continues: bid from Fortis, Santander and RBS

While last week mr Wellink, the governor of the Dutch central bank (also bank supervisor) really annoyed the EU commission by stating that he found the combined of Fortis, Banco Santander and RBS as quite risky (more than the Barclays bid), the three have decided to do their bid on ABN AMRO. So, as can be seen in the press-release, the bidding continues...

And in reply to the statements of Dutch central banker Wellink, we can read the following:
The Banks believe that execution risk would be lower than in a transaction with Barclays. The Banks already have significant presence and experience in all of ABN AMRO’s main markets, and also have proven capabilities in delivering transaction benefits from large-scale integrations and IT conversions, underpinning their ability to manage and integrate ABN AMRO’s operations

Meanwhile, the Minister of Finance has made it clear that the central bank only has an advisory role on the merger. See the information here. Still, we should note that there is a significant difference between the neutral English version of the press releases and the Dutch version. The English version states that advice of the central bank will be sought:
Dutch law requires the government to issue a declaration of no-objection for holding or increasing a qualifying holding in Dutch Banks. If a request for such a declaration is made in a case involving one of the five largest Dutch Banks, the Minister of Finance decides on the request in cooperation with the Dutch Central Bank.

A decision to grant a declaration of no-objection shall also take into account the necessity of warranting the sound and prudent operations of the financial institution concerned as well as the transparency of the proposed structure of the financial institution. The Minister shall in this regard seek the advice of the Central Bank.

But the Dutch version (here) states that the Ministry of Finance will decide on the statement of no-objections, when positively advised by the Dutch central bank. This can either be a bit of uncareful translation or a bit of careful communication to different audiences. Could it be that the Minister of Finance wishes to assure the Dutch readers/public that it will follow the positive central bank advice (support Barclay) meanwhile suggesting to non-Dutch readers that it will decide independently (while taking aboard the advice of the central bank)?

As a reminder, we should note McCreevy's statements on the central bank behaviour. See the article in the Herald last week:
However, former Irish finance minister McCreevy leapt to the Scottish bank's defence yesterday through Oliver Drewes, his spokesman. Drewes said: "All bids should be assessed in a non-discriminatory way."
So are the English-reading public indeed now lulled to sleep with a neutral and non-discriminatory statement of our Ministry of Finance while the Dutch get a more informative wink as to the Ministries of Finance real position?

Continued retailer battle in the US via the competition authorities

See the news-article onn National Retail Federation website. It shows how regulators call upon state legislators to do something about credit-card interest rates. Effectively this may not really be about policy any more.

It appears as if the existence of competition authorities is creating a new battlefield for businesses. Which is to hurt any other business by complaining and having them investigated by the competition authority. Even if the claim fails, one will have won by damaging the image of the other company and by having them allocate resources to lititgations/competition discussions, thus increasing the cost base. We may have seen a similar thing here in Europe in the beer-brewery market. Belgian based Inbev provided information to the EU Commission which then fined the breweries. And The Belgian-based InBev group received no fines as they provided decisive information about the cartel under the Commission’s leniency programme.

So what may become a serious problem in the future is that regulators that do not understand the workings of the market, may be fooled by some in the market into believing that a situation of non-competition occurs, while effectively there is nothing going on. But if you're cunning enough and having a cartel-buster (bound to view cartels everywhere as a part of his job description and goal in life) you can do damage to competitors or other stakeholders in the market.

So while we are already used to an increased number of litigations in society between players themselves (consumers, companies, governments) we may also face an increasing number based on administrative and competition law. I am not sure if that will really be productive, especially not in a situation where the Commission effectively not just wishes to fine the companies themselves but also states that all those damaged must be compensated too.

Dutch Competition authority moving in on large banks lending... but does so with an completely outdatet mindset

This week the Dutch competition authority has entered the larger banks (without notice) to demand information and archives on price setting in lending for business customers. See the FD-articles (login required; in Dutch). But it is an interesting case they're after. Let me try to explain why.

In older days (more than 20 years ago) the banks used to work with the so-called PD-system. PD stands for Promesse Disconto (Interest Rate for Promissory Notes) and that was an interest rate set by the central bank. Banks would determine the rates on commercial loans by means of a surplus percentage on the PD. So they would agree on an interest rate of PD+1 for example (meaning that if the PD changed, the interest rate for the customer would also). And in this old situation (with no Basle II, with little computing power at hand and little market segmentation), it was not uncommon that for certain classes of companies, a bank would use a similar surplus-rate. So companies would generally face quite similar loan levels. And you could indeed consider the market to be quite homogenous.

Now, today, having had the monetary changes in Europe towards the Euro, there is now mainly the European central bank rates that can be used as a reference rate. And since the changeover to Euro most large banks have devised a system where their local treasuries determine and set a so-called basis-interest rate for their own bank. This rate setting is done based on the ECB interest rate and the liquidity portfolio. So generally, when the ECB moves, the basis-interest rates of large banks are also bound to move (one a bit earlier than the other, but just as with the rain: after it starts, everyone will at some point in time unfold the umbrella).

Now it looks as if the Dutch competition authority has so little understanding of the loans market that they mistakenly still think the old system of 20 years ago is still in place. They appear to be looking at the moves in basic interest rates of banks (set by individual treasuries) and see this as an indication of no competition in the market for loans to businesses.

What are they obviously missing....?
- they think the interest rates displayed by banks (whether basic bank rate or rates for specific loans) are the final ones ; effectively those rates are merely the starting point for negotiations with the companies,
- they forget that we now have something as the internet and a large liquidity in the market, with a lot of banks all competing for the companies;
- they overlook the advances in technology leading to a more differentiated bank assessment of companies
- they forget that banks individual liquidity/risk profiles may be different due to the Basle II implementations chosen, as a result of which it is impossible to assume that as a starting point the cost of capital is equal for all banks
- Bizzner; the new internet based bank from Rabobank; is an initiative that by its sheer existence does not allow banks to extract margins out of this market. Likewise, they overlook the availability of private equity and other sources of funds for companies.

So here we see a nice example of policy intervention and policy analysis based on dogma's from the old world and from the academic books of quite some years ago. And I would personally be quite surprised if they find anything wrong. They didn't find problems in the area of savings (as reported a month ago). And they won't for lending.

What's interesting is that if indeed the basic banking knowledge of our competition authority is as outdated as it seems, they will also be unable to properly assess todays market practices and reality. So they'll spend our tax payers money to discover that they miss the proper expertise and really can't come to terms with the facts they find. I image they will then device a tactical retreat like: stuff was wrong at several banks, but we are going to be so kind not to pursue the matter any further, now that banks have explained what they did and made some adaptations.

And my take on this... ?

Considering that reputation and money are earned slowly and lost quickly (as they say in Spain I believe), it would be best if, at the end of the factfinding, the competition authority would also have the decency to spend a considerable amount of money reparing the damage they do to the image of the banks involved.

MasterCard sheds light on (low) SEPA awareness

See this article in Banking Business review: MasterCard sheds light on SEPA awareness - Banking Business Review to find out that awareness on SEPA is quite low with the public:
Throughout Europe, fewer than one in 10 (9%) debit cardholders have heard of SEPA, suggesting that a great deal more can be done to promote the concept. Awareness is especially low in the Netherlands (2%), France (3%), the UK (5%), Germany (5%) and Belgium (8%). In contrast, in Poland, the newest European Union member, one in three (29%) recognize the term 'SEPA.'

Now, why would customers (have to) care about SEPA anyway?
It is a policy concept rather than a new and shocking product reality. Already at this moment we can pay cross-border in a proper way and use cross-border ATM's and POS. The fact that there will be some technical tweaks and improvements here and there and some legal adaptations in contracts is really not that worrying or great news for the public. SEPA is not going to be a world shocking innovation but merely payments as usual with a bit more of a European twist.

And as for the public debate on prices and possible changes in price structure: the recent CapGemini report noted that last year prices in Europe went 2 % down and that price structures are increasingly geared to stimulate efficient payments and discourage inefficient payment methods. So that's nothing to be really worried about either.

And why would policy makers (have to) care about SEPA?
What should be our concern is that so many policy makers today are so overly involved in this SEPA-concept and so much aware. Effectively with a Payment Service Directive forthcoming, we can now see the gradual emergence of a panEuropean market with converging price levels, similar legal rules and similar standards. Which from a rational policy perspective doesn't call for any more or less attention than any other European market (for vacuum cleaners, dvd-players, washing machines or what have you). Still there is a lot of fuss being made by all kinds of regulators, consumer organisations and retailers, as if this market would deserve special further attention.

In my view SEPA doesn't really require this overdose of policy attention, although I do understand the emotional rationale. Having been ignored and arrogantly treated by banks throughout the 1980s-90s decades, European regulators were emotionally fed up and rationally right to call upon the banks to improve cross-border payments in 2001. But what surprises me is that the emotional thrill and feeling of 'it's payback-time for the banks' doesn't seem to wear off with time. Regulators remain overly emotional and sensitive to the sector, with consumers and retailers playing and reinforcing those emotions to the benefit of their own interests. Meanwhile the former arrogant bankers have been replaced by a different and cooperative breed.

It's a fine line they're walking here, because at some time the cooperative breed of bankers will just have to conclude that their counterparts are unreasonably emotional and that there is no room for a rational evidence-based debate on the retail payments market.

Take for instance the non-sense discussion on user mobility. I don't see policy makers argue that it is quite worrying that research shows that consumers switching rates for washing machines are low and an indication of a lack of competition in the market for washing machines. And that is because everyone understands that you buy a washing machine for the long run (10-15 years) and obliging the consumer to change washing machines every 3 years for the sake of increased competition is a silly thing. Yet replace washing machine with the word bank account, and suddenly all is different. Which shows that it's the emotions that are clouding the rational judgement here.

In sum: todays regulators in Europe appear to act as if the work on SEPA (Single Euro(pean) Payment Area) is not just that but also a case of SEPA: Sheer Emotional Political Angryness. My humble suggestion to them would be that they treat the work on SEPA in the spirit of SEPA: Sober Evidence-based Policy Analysis. Because that would really help Europe.

Currence investigation update: perhaps a lovers quarrel?

Today the financieele dagblad reports that it has somehow 'gotten hold of' a secret letter by the Dutch competition authority to Currence. This letter supposedly accompanies the published report (stating there was no problem; see earlier post). And the newspaper is now reading the letter to former commissioner Jorritsma and asking for comments. Jorritsma appears to be keen on being right after all and concludes that she is happy that her leaving the company (together with former director van der Veer) has lead to an improvement of the situation at Currence.

Which sounds a bit as if the whole Currence investigation is not about competition in the bank sector but about a love-affair gone sour between banks and the competition authority on the one hand and the former employee/commissioner and the newspaper on the other. Could it be that the divorce between the former lovers was a bit painful and thus, even after the judge rules a verdict in the case, the quarrel between the two sides continues?

Dutch competition authority rounds up investigation of Currence

See their press release (in Dutch) to discover that:
* former commissioner Jorritsma and former director van der Veer of Currence had complained about too much bank involvement with Currence, the scheme-owner of collective Dutch bank products such as PIN, e-purse (Chipknip), acceptgiro, direct debit and Ideal.
* the competition authority did not find anything suspicious but was pleased to note that there no more bankers in the board of commissioners of Currence.

So isn't it about time that we slowly let go of the general reservations and preconceptions with respect to anti-competitive behaviour of banks? The Dutch competition authority has done quite some work on this in the last years and only found reason in 2005 to fine the banks for their behaviour until 2002, but not afterwards.

Boober.nl: Dutch peer to peer lending via Internet

Boober.nl a peer-to-peer lending service was launched today, according to planet multimedia. Undoubtedly these guys will soon be confronted with supervisors explaining that they either need a license for:
- attracting and loaning deposits,
- operating as an intermediairy
- existing in the first place.

Polish competition authority bans interchange fees

Interesting topic, those interchange fees. The Polish competition authority decided to fine some 20 polish banks for using it, at least for not demonstrating that it was cost-based. See also the happy news at this site (polish retailers):
The Office for Consumer and Competition Protection (UOKiK) has decided to accept the arguments of The Polish Organisation of Commerce and Distribution (POHiD), which, five years ago, accused a group of banks of an illegal agreement to keep interchange fees for paying with Visa and MasterCard cards at stores, at a specified, high level. The UOKiK has fined 20 banks an aggregate sum of PLN 164m (€42m).

Interestingly the decision appears to be based (amongst others) on the reasoning that in other countries (such as the Netherlands) there is no interchange fee for debit-cards. So why need in Poland?

To be clear: while there is no formal interchange fee for debit-cards in the Netherlands, Dutch banks continue to stress that there is a compensation mechanism (in the form of dividends of the processor) which is the equivalent. So the Dutch appearance of the interchange fee is not the traditional interchange fee but higher dividend to shareholders in the POS-switch. So to refer to the Dutch as not having an interchange fee and thus implying that there is no compensation mechanism, is in my view incorrect. And it would be quite interesting to know if this correction to this Polish mis-'understanding' of the Dutch situation (which one can also encounter at the European Commission) would also change their judgment?

Other than that, this appears to be a case where Poland wishes to demonstrate its good EU citizenship by repeating the generic claims /thinking on interchange fee and ruling something which is deemed to be most popular among regulators. Only to find out later that the Commission itself is not daring to take a similar stance as it realizes that the issue is much more complex than they thought at first...?

Update: see also this overview article at Euractiv.

Dutch competition authority pleased with competiton for POS-switching but concerned/monitoring competition side-effects of evolution towards SEPA

Today the Dutch competition authority released their financial monitor 2006 (in Dutch) which contained two chapters on payments. One chapter outlined that as of the structural change to move the responsibility for negotiating POS-switching fees to banks, the competition increased. Small and large retailers get cheaper POS-switching. So that was a bit of good news.

But a bit of bad news as well. Chapter 6 demonstrates that the Dutch competition authority is still struggling to come to terms with SEPA. Their description is not so bad, but then again; not completely accurate either. The report speaks of one SEPA-system (implying one scheme/brand rather than standardised messages) and suggests that SEPA stands for Single European Payments Area (forgetting the focus on the Euro-zone: Single Euro Payments Area). Furthermore they take the migration deadline 2010 as a fixed deadline where all credit-transfers and direct debits in all the Eurozone will be sepa-compliant (whilst some national variations may still exist).

Furthermore the analysis of risks occurs on a card-based view of payments. Leading to a situation where the competition authority may forbid Dutch banks to agree bilaterally on lower interchange fees amongst them (in order to preserve the possibility for outside players to compete with the Dutch in the Netherlands). And funnily there is still the fear that the acuirer market is concentrated with one player (while effectively there are about 20 active in the market right now).

So, if one thing is clear, it is that it will be impossible for banks to satisfy all expectations. Politicians desire no fee hikes but do wish a payment service directive (which is going to cost). Retailers wish no fee rise but competition authority will not allow low-cost local agreements between Dutch banks. Central banks do not wish to see local variations of debit cards, but local interest groups do wish such a thing.

Where this will end is quite clear. Continued debates, bank-blaming and no consensus whatsoever. And later, when we are all old, we will come to realize that at this point in time we were trying to come to terms with the shift from domestic retail payments markets to European markets. Which brings us in a situation in which many fear to lose what they have and few are able to imagine the future and the benefits of what is to come. But assuming that we will not be hindered by geopolitical interruptions, these benefits will in the long run stand out: a deeper market in Europe, more competition, lower cost and convergence of fees.