One of the common views about Europe is how highly fragmented the regional market — 44 countries, multiple languages, and a myriad of payment methods — is.
And it’s no news that that fragmentation, according to Alexandre Maymat, head of global transaction and payment services at Société Générale, has meant higher fees and slower cross-border transaction speeds over the years, giving way to new payment means like cryptocurrencies that promise faster, cheaper and more transparent payment flows.
But as much as virtual currencies have gained popularity in recent years, Maymat argued they have a long way to go before they can replace traditional currency and payment infrastructure. “The recent events occurring in the crypto sector have reminded people, and corporates in particular, that as long as crypto is not properly regulated, it will remain very dangerous and very risky,” he told PYMNTS in an interview.
The same cannot be said about less risky regulated stablecoins and central bank digital currencies (CBDCs), Maymat noted further, pointing to the 100-plus countries worldwide exploring the feasibility of launching a wholesale or retail CBDC for their respective economies.
In Europe, for example, the European Central Bank (ECB) retail digital euro project, which moved into technical considerations earlier this year, has so far received strong political backing, per a PYMNTS report.
But although CBDCs and stablecoins are viewed as a safer alternative to cryptocurrencies, Maymat believes that central banks will need to make a strong case for a new digital currency when traditional payment channels are meeting all of consumers’ needs.
“So far, we have not identified clear needs of European citizens that are not being properly met by traditional mobile banking or card payment means,” he pointed out, adding any plans to use the digital euro to limit cash usage will be a much more difficult undertaking.
Some Europeans “use cash not because they’re unbanked but because they live in a digital desert,” he explained. “So to put in place a digital currency aimed at solving the issues of citizens who are not digitally savvy is probably not the best way to reduce [the use of] cash.”
And while EU authorities’ aim to develop a pan-regional digital currency is commendable, he further said that the establishment of the bank-led European Payments Initiative (EPI), which is working on launching a single EU digital wallet, largely meets that goal of promoting European sovereignty.
As Maymat noted, “Now that we have agreed on developing the EPI among five European countries, we can question the reason why we should develop a retail CBDC that will be very costly and complex to put in place and that does not respond to any identified needs of European clients.”
Finally, he pointed to the danger the current format of the retail digital euro can pose to the European financial services sector by driving part of banks’ liquidity, which is key to their lending business, to central banks. “That could weaken bank balance sheets and their capacity to play their traditional role of intermediation between saving money and lending money.”
Artificial intelligence (AI) is poised to continue disrupting industries, and no less in the payment and banking space, said Maymat.
“As banks, we’ve got a massive challenge [and that is how to] better leverage the data we gather to better understand our corporate clients — be it the way they manage their treasury or how they finance their short term needs,” he noted, adding that AI can help transform data into valuable insights “so that we can better advise them on liquidity management and short-term financing options.”
Then there’s the clearing business — the direct transfer of funds between countries with clearing banks acting as intermediaries to approve transaction flows between accounts. Here too, Maymat said AI technology can help reduce the cost of cross-border settlements for corporate clients while offering them access to an optimized, faster and frictionless payment process that is up to speed on issues relating to compliance.
So, while perhaps banks may be less mature than tech giants in the implementation of AI, he noted that the wealth of data they have access to, not to mention the confidence that clients have in FIs with regard to protecting their data and privacy, points to a promising future for AI in banking.
As Maymat said, “our goal is not to restrict our capacity to use AI but rather better understand what we want or do not want to do using AI, as well as the limit between the new levels of efficiency AI can offer [in giving] our clients specific advice tailored to their needs.”
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