Years ago, the European Central Bank began to push the market to develop a payment network to rival the U.S.-based card networks. The Europeans want this for control and, I suspect, a bit of regional pride. While the central bank has been chasing this dream for a while, it has yet to materialize.
A recent article in Forbes details the reasons why an alternative payment network has yet to arrive, including:
“…economies of scale, competition authorities’ pressure on interchange means and finally, and most importantly, the people who run banks couldn’t care less about it.”
But, the world has changed and the recent attempts may succeed thanks to the pandemic, according to this article:
EPI (European Payments Initiative) is the latest European attempt to build a scale rival to Visa and Mastercard (and perhaps, in the future, WeChat and Alipay). They’ve tried before and it’s gone nowhere. This time it might work because the pandemic will accelerate the transition to contact-free, in-app, omni-channel payments.
Originally backed by twenty French and German banks, the idea was that EPI would build a unified pan-European payment system, offering a card for consumers and merchants across Europe, a digital wallet and P2P payments. The banks backing the project (BBVA, BNP Paribas, Groupe BPCE, CaixaBank, Commerzbank, Crédit Agricole, Crédit Mutuel, Deutsche Bank, Deutcher Sparkassen- und Giroverband, DZ BANK Group, ING, KBC Group, La Banque Postale, Banco Santander SAN, Société Générale, UniCredit) are all serious players and can put muscle behind the initiative so unlike so previous attempt at a third scheme, this one has legs.
The unified real-time payments network in Europe may, in fact, provide the infrastructure to support a new way to pay, but the same hurdles still exist: a new network’s supporters will need to build scale, a lack of revenue opportunity is a real distractor, and I am not sure the market really cares yet.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
