The Libra Threat is an attack on the banking system

Eurozone banks are planning to implement an instant payment system by the end of 2020. The Libra threat, Facebook’s social networking cryptoma, is an attack on the supremacy of the banking system.

European Payments Council (EPC) CEO Etienne Goosse stressed that fintech firms are developing effective solutions, and banks should also keep up with innovation.

Goosse points out that large technology firms have a significant advantage over the fragmented banking system:

“They come with a global solution, under a global brand that offers many things that consumers seem to find wonderful. So we do not have time. “

The EPC Instant Payment Standard was adopted by approximately 60% of euro area creditors and providers of payment services. Direct payments allow transactions between individuals and companies in seconds. Traditional transfers take at least a day today.

The plan is for all euro area banks to join the EPC by the end of 2020.

A fragmented system

Several private organizations use the EPC standard for immediate payments, such as EBA Clearing, which brings together the largest banks in Europe, Iberpay in Spain or Nexi in Italy.

In November 2018, the European Central Bank launched its own settlement system for real-time transactions, known as the TIPS (Instant Payment Settlement).

The problem is that these systems only cover a few banks. The reason why payments between creditors of different organizations are often impossible.

Without full coverage, some customers may experience transaction failures if transfers involve banks outside the system, which would reduce confidence in the new service, another EPC official said.

“The challenge is now to make these mechanisms interoperable,” said Piet Mallekoote, CEO of the Netherlands Payments Association. The Netherlands already offers instant payments to all bank customers in the country. This is possible through a project supported by seven major domestic banks, including ING and ABN AMRO.

Libra threat to banks

Last week, the Bank of International Settlements (BIS), based in Switzerland, highlighted the threat that Facebook’s entry into the financial services market could bring to the international banking system.

The declared mission of Libra is to become “a simple global currency and an infrastructure to be used by billions of people.” Cryptomoneda will be a multipurpose payment instrument that facilitates direct transactions between people and companies globally. Finally, it can also serve as a facilitator for contracts, loans and insurance.

Several governments – including the US – have recognized the threat Libra poses to banking systems.

This is evident from the comments made by the National Bank of Australia (BNA):

“I’m not the first company to launch a cryptomonade-based payment solution. But they have huge coverage, obviously, through the Facebook platform. With one billion users of the social network, it is clearly a threat to the central banks “

“said Anthony Healy, director of the BNA.