Friday, October 22, 2021

Europe’s largest banks plan a joint attack on US payment giants.

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More than 30 of Europe’s largest banks and credit card processors are trying to create a payments giant capable of smashing an “oligopoly” dominated by the United States.

A Brussels-based company, which currently employs 40 payment experts, has until September to come up with a plan for a pan-European payments service that can be used to pay online and in stores, settle bills between individual consumers, and withdraw cash at ATMs.

“The idea is to build a European payments champion that can take on PayPal, Mastercard, Visa, Google and Apple,” said Joachim Schmalzl, president of the European Payment Initiative (EPI).

The banks and acquirers behind the initiative include Deutsche Bank, BNP Paribas, ING, UniCredit and Santander and currently process more than half of all payments in Europe. The project is supported by the EU Commission and financial regulators in the euro area.

So far, EPI has received more than € 30 million from its sponsors, Schmalzl said. He is also a board member of the German Savings Banks Association, the country’s largest retail banking group and a staunch supporter of the initiative, which is still looking for a brand.

The first real-world applications, a system for real-time electronic payments between consumers, could launch in early 2022, while a broader payments tool could follow in the second half of next year, Schmalzl said.

Burkhard Balz, a member of the Bundesbank board, said Germany’s central bank supported the EPI, which “will strengthen the EU’s strategic autonomy in the payments market, enhance competition and thus improve consumer choice.” The ECB also welcomed the initiative.

Card payments in Europe are processed primarily by US-based companies Four out of five transactions in Europe are currently handled by Mastercard and Visa, according to EuroCommerce, a lobby group for European retailers.

Schmalzl warned that such a high market share could hurt consumers and merchants, pointing to relatively high fees, as well as questions about data protection. “We want to offer an alternative to this oligopoly and give Europe’s traders and consumers a real choice,” he said.

Previous pan-European attempts to challenge American payments supremacy have failed miserably. The “Monnet Project”, which in 2011 had the backing of 24 European lenders, failed because it lacked political backing and failed to develop a viable business model.

The barriers to entry are high because any new payment scheme is only attractive to merchants if many customers use it, and vice versa. “Overcoming this chicken and egg problem is the key hurdle,” said Marcus Mosen, a payments consultant and former CEO of German payments firm Concardis.

A Deutsche Bank spokesman said a European payment plan was needed “to remain independent”, and that Germany’s largest lender has joined the initiative “to support this joint effort by European financial institutions.”

Several countries have payment solutions that are successful in specific use cases. For example, Germany’s “Girocard” and France’s “Carte Bancaire” offer affordable access to cash and in-store payments, and the Netherlands has the e-commerce payment systems “iDEAL”.

“National solutions cannot be scaled beyond European borders,” said Schmalzl. He said the idea behind EPI was to take the best national initiatives, harmonize them and then implement them across Europe.

“No one [in Europe] It alone can compete with the credit card giants in the US. That will be possible if we team up. “

The Brussels-based EPI team started nine months ago. After the summer, the consortium sponsors 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 pool the necessary resources if we team up in Europe.

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