Can Europe wean itself off US bank card corporations? – DW – 05/02/2025 | EUROtoday

Since Donald Trump has returned to energy, Europe has been involved about its reliance on the United States, and the way it might doubtlessly threaten European safety. One such space below scrutiny is digital funds.

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

Lagarde instructed unbiased Irish radio broadcaster, NewsTalk, just lately that Europe would want 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, in keeping with 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, akin 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 often known 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 guide with 4 many years of expertise within the finance trade. He instructed DW that when you 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,” mentioned Godschalk, who’s managing director of PaySys, which is a funds techniques consultancy primarily based in Frankfurt, Germany.

He additionally challenges the ECB’s declare that nationwide techniques do not work for cross-border funds. That may be true for purchases at bodily shops overseas, he mentioned, 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 instructed 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 say their independence from “foreign monetary powers,” he mentioned.

“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 turn out 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,” mentioned Godschalk. That means authorization, clearing, and settlement are all dealt with by Russian processors.

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

This method might additionally function a brief resolution for Europe, Godschalk suggests as it will enable intra-European card funds to bypass Visa and Mastercard networks, making it tougher for US corporations to disrupt transactions throughout the EU.

But implementing such a system is not any fast repair. Introducing EU-wide regulation or laws to that impact would take not less than 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 threat.

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

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

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

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

Wero: A European fee system in its infancy

A mission launched in 2020 and referred to as  European Payments Initiative (EPI) can also be engaged on a homegrown various 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 named 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 e-mail handle — much 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 mentioned 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 in a position to constructed its personal bank card community to rival the American giants.

Godschalk famous that a number of makes an attempt have been made to ascertain 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 have been bought — paradoxically, to US corporations.

This article was initially written in German.