1. Introduction

 1. Introduction

The Irish and European payments landscape is undergoing a period of significant change and rapid innovation with new market players and business models providing a range of innovative services such as digital wallets to consumers over recent years. Since the development of the National Payments Plan (NPP) over ten years ago, the payments landscape in Ireland, as well as globally, has changed fundamentally and further major changes are likely in the next decade.

The 2013 NPP covered a period when Ireland was undergoing a digitisation transformation, moving from analogue technology and paper to digital technology and processes in order to become more efficient. Building on this digitisation we are now in a period where the Irish economy and society are digitalising. Digitalisation is about transforming entire processes, and applying new technologies bringing new and dramatic levels of innovation to all sectors.

In Ireland, the banking sector has undergone a fundamental transformation in recent years. A level of change that led to the Government’s decision to undertake a Retail Banking Review[1] (RBR) to examine the changes, their impact on business and consumers, and understand the implications for the future of the sector. Notable changes include a reduction in the number of traditional retail banks serving the sector has reduced from twelve to three as banks were amalgamated, or closed down, and while foreign owned entrants exited the Irish retail market. In parallel, Ireland’s FinTech sector has grown in importance[2]. There has also been a considerable acceleration in technological developments, for example smart phones[3], contactless payments and the pace of uptake of these innovations have been boosted by the Covid-19 pandemic. Spurred on by the pandemic, Ireland’s payments landscape has become increasingly digital. As in most countries, the pandemic changed people’s habits, but also helped hasten existing trends such as the shift to digital payments, in particular contactless payment, the reduction in cheque usage, and the digital transformation of businesses by pushing them to conduct more transactions online.

Reflecting these developments, the RBR, published in November 2022, stated that:

The Review Team recommends a National Payments Strategy be developed. Work should start in early 2023, and the work should be completed in 2024. This strategy should set out a roadmap for the future evolution of the entire payments system. The strategy should take into account developments in digital payments, and guide how future changes should be made to access to cash criteria and other issues.

Furthermore, the RBR recommended that the Department of Finance develop Access to Cash legislation and prepare Heads of a Bill in 2023 for this area of work.

On 27 June 2023, the Terms of Reference (ToR) for the National Payments Strategy (NPS) (see Annex 1) were published. They set out that the Strategy should be informed by, and aligned with, the Retail Payment Strategy[4] of the European Commission and the Eurosystem’s Cash Strategy[5].

The ToR highlight that the goal of NPS is to ‘enhance and build public trust in, and the effectiveness of the payments system’, based on the following interlocking principles:

• Access and Choice – promoting reasonable options for consumers and small businesses
• Security and Resilience - of the payments system and system operators
• Innovation and Inclusion – future focus that enhances interoperability and inclusion
• Sustainability and Efficiency – solutions that have regard to cost / benefit and the environment.

Following the publication of the ToR, the European Commission published on 28 June 2023, proposals related to payments: PSR[6] and PSD3[7]. PSR involves a “Proposal for a regulation of the European Parliament and of the Council on payment services in the internal market and amending Regulation (EU) No 1093/2010”. PSD3 relates to a “Proposal for a directive of the European Parliament and of the Council on payment services and electronic money services in the internal market amending directive 98/26/ec and repealing directives 2015/2366/eu and 2009/110/ec”. In addition, the European Commission adopted a legislative proposal on the legal tender of euro banknotes and coins and the digital euro proposal [8].

The Department of Finance has established a dedicated team to develop the NPS. This team is engaging with the key stakeholders in the public and private sectors to ensure the NPS incorporates input from across society on the areas covered by the ToR, especially the four principles driving this work. In addition, the team is seeking the views and perspectives from the wider public, both business and consumers from across all parts of society and the economy. In overall terms, the stakeholder engagement includes:

• Public consultation – The team preparing the NPS want to obtain the considered opinion of stakeholders, including the public, on key aspects of the NPS. This is critically important given that the issues being dealt with as part of the NPS have significant impact and consequences for consumers, SMEs, the economy and the retail banking sector in Ireland.
• Targeted engagement – The team preparing the NPS will engage with key stakeholders involved in payments in order to inform final recommendations.