European banks join hands to take on US dominance in online payments

European banks join hands to take on US dominance in online payments

Some of Europe’s biggest banks and credit card processors are joining forces in a bid to create a payments giant that can take on a market currently dominated by the U.S. The plan, set up by a Brussels-based company, is to develop a set of proposals in September to offer a structure for online and in-store payments, along with other options for paying bills and withdrawing money from ATMs.

The banks that have so far signed up for the European Payment Initiative (EPI) collaboration include Deutsche Bank, BNP Paribas, ING, UniCredit, and Santander, which already process more than half of all payments in Europe. The incentive has also received the support of the European Union, along with financial regulators in the eurozone.

The project has also attracted solid funding so far, with 30 million euros from lenders for the EPI. “The idea is to create a European payments champion that can compete against PayPal, Mastercard, Visa, Google, and Apple,” said Joachim Schmalzl, president of the EPI.

Adding to the strength of the scheme is the fact that Schmalzl sits on the board of directors of the German Association of Savings Banks and is a staunch supporter of the project. However, the initiative has yet to be officially branded.

Currently, the aim is to have applications ready and launched in practice early next year. The aim is to develop a system for real-time payments between consumers, followed by a scaled-up 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 processed mainly by US-based companies. To underscore the dominance of US companies in payment processing, four out of five transactions in Europe are processed by Mastercard and Visa, according to lobby group EuroCommerce.

The move is in response to what the alliance believes is a market dominance that is detrimental to both consumers and merchants, with relatively high fees contributing to what Schmalzl calls an “oligopoly.” The new payment structure could give both merchants and consumers more choice, he claims.

However, there have been other attempts to break the U.S. dominance in payment processing. For example, the Monnet project was launched in 2011, which received the support of 24 European lenders, but ultimately failed to establish a workable business model.

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