A Model of Digital Payment Infrastructure Formation and Development Under a Emerging SEPA Regime

The Single Euro Payments Area (SEPA) is probably the most ambitious self-regulatory project aimed at creating a single integrated European digital payments market since the introduction of the Euro. SEPA aims to make EU more innovative and competitive. When considering the SEPA initiative and combining it with the disruptive and innovative nature the mobile phone permeates, the result is a market that is rapidly transforming from well-established into a state of flux. We build a model to understand and explain this transformation of the digital payment infrastructure. The model captures the formation and development of digital payment infrastructure with a particular emphasis on the regulator´s perspective. It consists of four stages characterized by slow incremental change following by short rapid bursts of discontinuity. Each stage is portrayed by its evolutionary dynamics, the nature of the payment platform, the legal implications, the regulatory asymmetry, the level of competition, and what drives the discontinuity.