Institute for Prospective Technological Studies Electronic Payment Systems – Strategic and Technical Issues – Background Paper No. 1 Electronic Payment Systems Observatory (epso)

Legal notice Neither the European Commission nor any person acting on behalf of the Commission is responsible for the use which might be made of the following information. Abstract The first Background paper of the Electronic Payment Systems Observatory (ePSO) identifies the strategic and technical issues that will be discussed in the ePSO Forum – an online discussion group consisting of payment systems experts and a broad range of market players. The discussion will concentrate on electronic retail payment systems-focussing on the needs of consumers, merchants and SMEs. While in principle all electronic retail payment systems will be analysed, special emphasis will be given to payment methods in the context of electronic commerce on the Internet and the development of cross-border payment systems. The issues that have been identified are grouped around eight broad categories: e-money, enhanced access products, security and integration of payments into online transactions. Some of the major issues are: G the availability of reliable data that are comparable across different countries G the impact of the EMI Directive and its implementation on payment systems innovation and the position of Europe in the field of global competition G the relationship between interoperability and standardisation and the role of bridging technologies G the potential for competition between bank-based payment networks and other networks (e.g. mobile phone networks) G the effects of cheaper and faster online connections on the demand for off-line payment solutions G the provision of privacy and security at reasonable cost and the possibility of offering different trade-offs between costs and security G the implications of a functioning PKI for the various electronic payment schemes G feasibility of transaction-based micro-payment systems and the potential market for such solutions G new access products and the position of banks vis-á-vis non-banks in payments G current changes in the payment system and the effects on the bridging of the gap between cross-border and national payments G ownership of multi-application smart cards (the financial industry, the government or the individual) G payments in the wider context of shopping protocols and browser standards.