This year, Europe’s single market turns 30. This is the occasion for everyone to reflect on the enormous benefits deriving from the free movement of people, goods and capital.
Mobility benefits both people and businesses of all sizes. Larger markets provide consumers with greater choice and lower prices.
The economy develops because industries and companies are encouraged to innovate and find new partnerships. If payments can move smoothly, so can goods and services, and so will ideas.
International trade, therefore, also contributes to strengthening peace and creating open societies.
Payments across national borders are vital for European cooperation. The same role is played by international payments for the international economy. One of the factors that made globalisation possible was the creation of global standards and technical solutions for businesses and consumers to pay each other regardless of their location. Eventually, these payment flows became largely digital.
SEPA (Single Euro Payments Area) is a standardisation that makes digital payments across Europe easier, safer and faster. But even European payments are often cumbersome, take several days to arrive or are expensive and involve fraud risks.
We need a discussion about how international payments should work smoothly in the future, with or without international tensions
Thousands of cases have been reported where companies and authorities have discriminated by refusing to deal with payments from or to accounts in European countries. This contributes to creating a fragmented internal market.
Geopolitical events – such as tensions between the US and China and the sanctions imposed on Russia – also affect international payment flows. While economic sanctions might be necessary, it is also important that we have a discussion about the risks of making restrictions on payment flows permanent, as these might break down the international economy as a whole in the long term.
Above all, we need a discussion about how international payments should work smoothly in the future, with or without these international tensions.
How can new technological possibilities be created, where openness and security are still balanced? How can we create even more opportunities for consumers and companies to trade in increasingly large markets?
A good basis can be found in the road map to improved cross-border payments, which the G20 countries have developed since they made this a priority in 2020. But the industry can also contribute on its own with market-driven initiatives to speed up that development.
Free capital movement, however, must also go hand-in-hand with strict anti-money laundering (AML) and Know Your Customer procedures (KYC). As a payment operator, it is our legal obligation to prevent money laundering and we have already integrated several tools in our workflow to prevent international payments from being used for malicious purposes.
Europe is home to some of the world’s most innovative fintech companies. As part of this sector, I invite other players in the payment infrastructure – such as banking and retail companies – to collaborate to further develop the technology. It would be a good way to celebrate the 30th anniversary of the European Single Market.
Johan Strand is CEO of Zimpler.