European Payment Provider Planned To Rival US Firms
Over 30 of the largest banks and credit card processors in Europe are banding together to attempt to create a new payment provider – the European Payment Initiative (EPI) – as a rival to the largest options that are all US-based.
Over 40 payment experts have been drafted together in Brussels to create a plan by September for a new pan-European payment service that would be able to be used in stores, for online payments, to withdraw money from ATMs and to make individual payments between users.
The worlds largest payment services at the moment – Mastercard, Visa, Google and Apple – are all centred in the US.
Fears Over Rising Fees
The reason for the new payment provider is to challenge the domination of the US companies to ensure that customers in Europe are treated fairly.
With an “oligopoly” in place, there are concerns that fees could rise for consumers and merchants over time, with no potential challengers in place. Also, data protection could become an issue as the US markets aren’t as heavily regulated as those across Europe, particularly countries within the EU and the UK.
Joachim Schmalzl, the chair of the European Payment Initiative said “We want to offer an alternative to this oligopoly and give merchants and consumers in Europe a real choice.”
Some countries, including Germany, the Netherlands and France, have their own payment systems in place already. However, none of them cover all of the requirements of European banking. The requirement is to take the best elements from each and then gap-fill with any further requirements to create a tool that serves all customers and merchants.
Nobody [in Europe] on its own can compete with the US credit card giants. That will be possible if we team up… As a level of investment, several billions of euros will be needed… We can jointly muster the necessary resources if we team up in Europe.
Joachim Schmalzl, the chair of the European Payment Initiative
The banks behind the EPI include Santander, Deutsche Bank, BNP, ING and more and there has already been €30m in funding committed. The European Commission is on-board along with the financial regulators for the euro area.
Currently, no UK banks have suggested they will join the initiative – it is unclear how Brexit would impact the potential for British banks to take part – although the likelihood is that the UK will at least partially adopt the system if successful in the same way that customers and merchants make use of Visa, PayPal, Mastercard and so on to currently manage payments.
It’s expected that the first part of the EPI – an electronic real-time payment processor for C2C payments, could be ready by early 2022, with further tools launched later that year.
It’s not the first time a pan-European payments system has been planned. A prior attempt to set up a rival to the US firms launched in 2011 and was backed by 24 lenders, but it failed as no viable model could be created, and it did not receive the required political backing.