Some of Europe’s largest banks and credit card processors are teaming up to create a payments giant that can survive in a market currently dominated by the US. A Brussels-based company plans to prepare a number of proposals in September to offer a structure for online and in-store payments, as well as other options for paying bills and withdrawing money from ATMs.
The banks that have signed up to collaborate with the European Payment Initiative (EPI) include Deutsche Bank, BNP Paribas, ING, UniCredit and Santander, which already process more than half of all payments in Europe. The incentive was also supported by the European Union as well as the financial regulators in the euro area.
So far, the project has been solidly financed by lenders for the EPI with 30 million euros. “The idea is to create a European payment champion who can compete against PayPal, Mastercard, Visa, Google and Apple,” said Joachim Schmalzl, President of the EPI.
The strength of the program is reinforced by the fact that Schmalzl sits on the board of the German Savings Banks Association and gives decisive support to the project. However, the initiative has yet to be officially branded.
The current goal is to provide applications and put them into practice at the beginning of next year. The aim is to develop a system for real-time payments between consumers, followed by an expanded payment instrument by the second half of 2022.
If successful, the new payment processing structure could give the EU more autonomy, especially since card payments are currently mainly processed by US-based companies. In order to underline the dominance of US companies in payment processing, four out of five transactions in Europe are processed by Mastercard and Visa, according to the EuroCommerce lobby group.
The move is a response to what Allianz believes is market dominance that harms both consumers and retailers, with relatively high fees adding to what Schmalzl calls an “oligopoly”. The new payment structure could give both merchants and consumers more choices, he claims.
However, there have been other attempts to break US dominance in payment processing. For example, the Monnet project started in 2011, supported by 24 European lenders, but ultimately failed to establish a workable business model.