Can Europe reduce its dependence on US bank card corporations? – DW – 05/02/2025 | EUROtoday

Since Donald Trump has returned to energy, considerations have been mounting throughout Europe about present dependencies on the United States, and whether or not they might grow to be a danger to European safety. One such space now below scrutiny is digital funds.

The president of theEuropean Central Bank (ECB), Christine Lagarde, has stated she is alarmed.

Lagarde advised unbiased Irish radio broadcaster, NewsTalk, lately that Europe would wish to “reduce vulnerabilities that arise from the current payment platform’s infrastructure being foreign-owned” and ensure there’s a “European offer available — just in case.” For her, it’s “important to keep digital payments under our control.”

Different ranges of dependency throughout the EU

Europeans are ardent customers of cashless funds, with 56% of all cashless transactions within the first half of 2024 being made by card, based on ECB knowledge. That’s greater than 40 billion transactions.

But the extent of reliance on US card networks like Visa and Mastercard varies considerably throughout EU member states.

Some international locations, like Ireland and the Netherlands, are utterly depending on Visa and Mastercard, the ECB knowledge present. Others, equivalent to Germany and France, have their very own home card techniques and are due to this fact much less reliant on US corporations.

In Germany, the Girocard — previously referred to as EC card — holds over 70% of the market share, whereas in France, nationwide fee techniques account for practically 80%.

How critical is the issue?

One professional providing a extra skeptical view is Hugo Godschalk, a funds advisor with 4 a long time of expertise within the finance trade. He advised DW that if you happen to have a look at complete European fee visitors — together with business-to-business transactions — lower than 1% by way of worth flows via US techniques.

“You really can’t speak of dominance in that case,” stated Godschalk, who’s managing director of PaySys, which is a funds techniques consultancy based mostly in Frankfurt, Germany.

He additionally challenges the ECB’s declare that nationwide techniques do not work for cross-border funds. That could be true for purchases at bodily shops overseas, he stated, however not for on-line buying inside Europe.

Rise of app-based funds

Europe’s vulnerability does not finish with card funds. Increasingly, shoppers are paying with smartphones by way of apps, the place American tech corporations like Apple Pay, Google Pay, and PayPal lead the market.

These app-based funds already account for practically 10% of all retail transactions, ECB Chief Economist Philip Lane advised an viewers throughout a convention in Cork, Ireland, this March, and annual progress charges there are within the double digits.

Europeans are witnessing a “global shift towards a more multipolar monetary system, with payments systems and currencies increasingly wielded as instruments of geopolitical influence and competing jurisdictions” that will search to claim their independence from “foreign monetary powers,” he stated.

“This dependence exposes Europe to risks of economic pressure and coercion and has implications for our strategic autonomy, limiting our ability to control critical aspects of our financial infrastructure,” Lane warned.

Could Russia’s mannequin work for Europe?

What stays a thought experiment in Europe has already grow to be actuality in Russia. After the invasion of Ukraine in 2022, Visa, Mastercard, American Express, and PayPal all ceased operations in Russia. But President Vladimir Putin had ready for such a state of affairs.

“He had already mandated years earlier that processing of domestic Visa and Mastercard transactions must take place within Russia,” stated Godschalk. That means authorization, clearing, and settlement are all dealt with by Russian processors.

As a consequence, Russians might proceed utilizing their domestically issued Visa and Mastercard playing cards — however solely inside the nation.

This strategy might additionally function a short lived answer for Europe, Godschalk suggests as it could permit intra-European card funds to bypass Visa and Mastercard networks, making it tougher for US corporations to disrupt transactions inside the EU.

But implementing such a system isn’t any fast repair. Introducing EU-wide regulation or laws to that impact would take a minimum of two to a few years, Godschalk added.

Waiting for the ‘digital euro’

Godschalk believes the ECB’s warnings about fee dependencies are partly a method to advertise the concept of a so-called digital euro — a central bank-issued foreign money that, like money, carries no credit score danger.

By distinction, the cash in financial institution accounts is created by business banks and is theoretically much less safe. If a financial institution fails, the cash might vanish — though deposit insurance coverage sometimes protects clients from such losses.

The ECB has been engaged on the digital euro undertaking since 2021. The European Commission introduced a draft regulation in June 2023, however the European Parliament has but to approve it.

Key questions stay unanswered, equivalent to whether or not all banks will probably be required to supply digital euro accounts, and whether or not retailers should settle for them. As a consequence, the launch of the digital euro stays unsure and will take years.

So far, the banking sector has proven little enthusiasm, fearing it could lose elements of its enterprise. And shoppers have not been given compelling causes to change to a brand new system, Godschalk famous.

Wero: A European fee system in its infancy

A undertaking launched in 2020 and referred to as  European Payments Initiative (EPI) can be engaged on a homegrown different to US fee techniques. It brings collectively European banks and fee service suppliers from a number of international locations.

The initiative’s new funds system is known as Wero and was launched in July 2024. Some German banks already help cell funds by way of Wero. Unlike conventional wire transfers, Wero does not require a 22-digit IBAN. Instead, customers can ship cash utilizing a cell phone quantity or electronic mail handle — just like how PayPal works.

The downside? Hardly anybody has heard of it. A survey performed in October 2024 by German price-comparison portal Verivox discovered that almost 90% of 1,000 respondents in Germany stated they did not know what Wero is.

And what a couple of European bank card community?

That raises the query of why Europe hasn’t been capable of constructed its personal bank card community to rival the American giants.

Godschalk famous that a number of makes an attempt have been made to determine a European card system, however curiosity notably in main international locations like Germany and France has been low, primarily as a result of cross-border transaction volumes are comparatively small.

In the top, a lot of the home techniques had been offered — satirically, to US corporations.

This article was initially written in German.