More than 30 of Europe’s biggest banks and credit card processors are trying to create a payments giant capable of breaking an “oligopoly” dominated by the United States.
A Brussels-based company, which currently employs 40 payment experts, has until September to develop a plan for a pan-European payment service that can be used to pay online as well as in-store, to settle bills between consumers individual and to withdraw. cash at ATMs.
“The idea is to build a European payments champion who can take on PayPal, Mastercard, Visa, Google and Apple,” said Joachim Schmalzl, president of the European Payments Initiative.
The banks and acquirers behind this initiative include Deutsche Bank, BNP Paribas, ING, UniCredit and Santander and currently process more than half of all payments in Europe. The project benefits from the support of the European Commission as well as financial regulators in the euro zone.
EPI has so far received more than € 30 million from its backers, Schmalzl said. He is also a member of the board of directors of the German Association of Savings Banks, the country’s largest retail banking group and a strong supporter of the initiative, which is still on the hunt for a brand name. .
The first real-world applications – a system for real-time electronic payments between consumers – could launch in early 2022, while a larger payments tool could follow in the second half of next year, Schmalzl said.
Burkhard Balz, Member of the Board of Directors of the Bundesbank, said that the German central bank supports the EPI, which “would strengthen the EU’s strategic autonomy in the payments market, strengthen competition and thereby improve the choice of consumers ”. The ECB also welcomed this initiative.
Card payments in Europe are primarily processed by companies based in the United States. Four out of five transactions in Europe are processed by Mastercard and Visa, according to EuroCommerce, a lobby of European retailers.
Schmalzl warned that such a dominant market share could hurt consumers and merchants – highlighting relatively high fees as well as questions about data protection. “We want to offer an alternative to this oligopoly and give European traders and consumers a real choice,” he said.
Previous pan-European attempts to challenge US supremacy in payments have failed miserably. The “Monnet Project”, which in 2011 was backed by 24 European lenders, failed because it lacked political support and failed to develop a viable business model.
Barriers to entry are high because payment systems are only attractive to merchants if many customers use them – and vice versa. “Overcoming this chicken-and-egg problem is the biggest hurdle,” said Marcus Mosen, payments consultant and former CEO of German payments company Concardis.
A spokesperson for Deutsche Bank said that a European payments system was needed “to remain independent” and that Germany’s largest lender had joined the initiative “to support this joint effort of European financial institutions”.
Several countries have payment solutions that are successful in specific cases. For example, the “Girocard” in Germany and the “Carte Bancaire” in France offer inexpensive access to cash and in-store payments, and the Netherlands has the “iDEAL” online payment system.
“National solutions cannot be extended beyond European borders,” Schmalzl said. He said the idea behind the EPI was to harmonize the best national initiatives and then roll them out across Europe.
“Nobody [in Europe] on its own, can compete with the US credit card giants. It will be possible if we team up. “
The Brussels-based EPI team started nine months ago. After the summer, the consortium’s funders will decide whether to go ahead with the idea, which would require significant additional funding. “As a level of investment, several billion euros will be needed,” Schmalzl said, adding: “We can jointly bring together the necessary resources if we team up in Europe.”