The EU’s biggest banks have spent years quietly creating a new way to pay that could finally allow customers to ditch their Visa Inc and Mastercard Inc cards — the latest sign that the region is looking to dislodge two of the most valuable financial firms on the planet.
Wero, as the project is known, is now rolling out across much of western Europe. Backed by 16 major banks and payment processors including BNP Paribas SA, Deutsche Bank AG and Worldline SA, the platform would eventually allow a German customer to instantly settle up with, say, a hotel in France using their own bank account instead of a Visa or Mastercard.
That might sound simple, but if the firms pull it off, it could end up costing the two payment giants billions of dollars of the fees they reap from European merchants each time consumers swipe one of their cards at checkout.
Illustration: Yusha
However, more importantly, it is an example of Europe’s unease about relying on the US for key pieces of infrastructure — financial or otherwise. Ever since Russia invaded Ukraine and the two networks yanked the country’s ability to conduct everyday payments, governments around the world have been wary of deepening their reliance on them.
“Visa and Mastercard being so big, they have in their hands a lot of market control power,” said Martina Weimert, chief executive officer of European Payments Initiative (EPI), the company behind Wero.
The idea is to build up an “alternative to international solutions in order to offer European players and consumers a European choice.”
Wero has a long way to go before it stacks up against Visa and Mastercard, which together process tens of trillions of dollars globally every year, or even the new generation of digital payment firms competing fiercely for consumers moving money. Weimert conceded that “it would be very presumptuous” to call the firm a challenger.
“We are a kind of a start-up,” she said, albeit one that already has 500 million euros (US$558.4 million) from its backers and a ready-made customer base from its banking participants.
Within days of Russia’s invasion of Ukraine in 2022, Visa and Mastercard moved swiftly to suspend their operations, preventing overseas payments by Russian cardholders and halting foreigners from making transactions on Russian soil.
Russia’s central bank, ready for this sort of crisis, had previously created the Russian National Payment Card System to process transactions domestically, even if the cards carried a Visa or Mastercard logo. This workaround meant consumers could continue to make payments locally after the invasion.
“For those people who are interested in Mastercard, you should be interested in what the nationalistic tendencies are around the world,” Mastercard CEO Michael Miebach told investors on a conference call last year. “There are countries who are sitting and saying: ‘What will happen to us if a similar kind of situation as Russia played out?’ Which has got nothing to do with Mastercard, per se, but it’s got everything to do with the political environment which we’re operating in.”
Even before the networks’ showdown with Russia, the European Central Bank had grown worried that it lacked sufficient sovereignty over its payments systems. That is where EPI is supposed to come in.
Plenty of national challengers have emerged in Europe over the years, such as Swish in Sweden, Twint in Switzerland and iDeal in the Netherlands. However, none of them are quite as ubiquitous as Visa or Mastercard — for instance, iDeal handles 70 percent of online commerce in the Netherlands, but does not yet allow consumers to make payments in stores. Often, Europeans cannot use these tools in neighboring countries, so they are forced to opt for US brands.
Wero, which acquired iDeal as well as Luxembourg-based Payconiq last year, seeks to plug those gaps, the banks say. Its services would be available both through its own app and through participating lenders’ platforms.
“Payments is a matter of volumes. If you don’t have volumes, you don’t have the capacity to be competitive” on user experience, said Carlo Bovero, BNP Paribas’s global head of cards and innovative payments.
The bank has more than 35 million subscribers for its Paylib payments service in France, who are being folded into Wero.
To be sure, Europe has stumbled with its previous attempts in this space. The Monnet project sought to create a pan-European card brand, but folded over a decade ago after disagreements over the business model. EPI started in 2020 with a similar idea but was forced to narrow its scope as Spanish banks dropped out of the alliance.
It decided instead to start with account-to-account payments as this was cheaper and easier for member banks to integrate. EU regulations for instant payments, mandating banks to process money transfers within 10 seconds, made that focus more pressing. Next year, it wants to expand into e-commerce and offer in-store payments with retailers across the continent after that.
“It is the right step forward for Europe, apart from everything else that we bring to the European level, to also consider payments more holistically through a European lens,” said Ole Matthiessen, Deutsche Bank’s global head of cash management and head of corporate banking in Asia-Pacific, Middle East and Africa.
Matthiessen sits on the EPI board.
“The issue of payment sovereignty is also a political one,” he said.
Some of the building blocks for easy cross-border payments already exist in the form of the euro, which is now accepted in more than 20 countries. Still, in the digital space, “local payment methods have become the standard,” Matthiessen added. “Now we have to bring it to the front end and make it more convenient for the end user. There are still too many users ultimately using offerings from either the US or the East, China particularly.”
Visa and Mastercard, founded by banks in the 1950s and 1960s as an alternative to cash, processed US$14.8 trillion and about US$9 trillion respectively last year, taking a cut for handling transactions. The two companies have been under fire from regulators, customers and lawmakers worldwide for the fees they charge.
It is a volatile time to be a global payment company as numerous regional rivals emerge. Seven major US banks including JPMorgan Chase & Co and Wells Fargo & Co have coalesced around Zelle, a system that offers speedier transactions between accounts. It had grown to 120 million accounts by last year and competes with the likes of PayPal Holdings Inc.
In Brazil, the central bank’s instant-payment system Pix grew along with COVID-19 pandemic-driven online shopping and is now targeting Brazilian tourists in Europe. The Indian government-backed Unified Payments Interface (UPI), crossed 100 billion total transactions last year after eight years in operation.
In Asia, the Bank for International Settlements has this year started work on Project Nexus for instant cross-border payments between Malaysia, Philippines, Singapore, Thailand and India. Meanwhile online wallets such as China’s AliPay and WeChat Pay along with Apple Pay and Google Pay continue to expand.
Overall, payments revenues grew at an annual rate of 8.3 percent from 2017 to 2022, taking the revenue pool to US$1.6 trillion, Boston Consulting Group data showed.
Consumers have plenty of other options in their wallets and smartphones, making it a challenge for Wero to find a place, even if its speed and lower costs make it “likely that merchants will adopt the technology,” Sonja Forster and Elisabeth Rudman from Morningstar DBRS said in a July note.
For now, Visa and Mastercard have by far the biggest heft and can afford to be gracious about their challengers.
“I look at EPI as it’s yet another solution, and we welcome that,” Miebach said in an interview. “At the same time, we want to put out Mastercard payment solutions that give the consumer a reason to make a choice to use our product versus somebody else’s. So, I’m not particularly worried about it. We know what it takes to invest and scale a business. It’s very hard to do.”
He said that “the principles of choice and competition are good ones” for the European payments landscape, a sentiment shared by executives at Visa.
“The competitive landscape in Europe has never been richer and for me EPI is one of those solutions,” said Charlotte Hogg, chief executive officer for Visa’s European operations.
She pointed to a bundle of regulatory changes about a decade ago aimed at cracking open competition in finance for helping to stir up the market.
“What doesn’t exist despite the growth of open banking — and there’re now 500 of these players across Europe — is the rules of the road for payments in terms of what happens when they go right and what happens when they go wrong,” Hogg said.
Jan. 1 marks a decade since China repealed its one-child policy. Just 10 days before, Peng Peiyun (彭珮雲), who long oversaw the often-brutal enforcement of China’s family-planning rules, died at the age of 96, having never been held accountable for her actions. Obituaries praised Peng for being “reform-minded,” even though, in practice, she only perpetuated an utterly inhumane policy, whose consequences have barely begun to materialize. It was Vice Premier Chen Muhua (陳慕華) who first proposed the one-child policy in 1979, with the endorsement of China’s then-top leaders, Chen Yun (陳雲) and Deng Xiaoping (鄧小平), as a means of avoiding the
As the Chinese People’s Liberation Army (PLA) races toward its 2027 modernization goals, most analysts fixate on ship counts, missile ranges and artificial intelligence. Those metrics matter — but they obscure a deeper vulnerability. The true future of the PLA, and by extension Taiwan’s security, might hinge less on hardware than on whether the Chinese Communist Party (CCP) can preserve ideological loyalty inside its own armed forces. Iran’s 1979 revolution demonstrated how even a technologically advanced military can collapse when the social environment surrounding it shifts. That lesson has renewed relevance as fresh unrest shakes Iran today — and it should
In the US’ National Security Strategy (NSS) report released last month, US President Donald Trump offered his interpretation of the Monroe Doctrine. The “Trump Corollary,” presented on page 15, is a distinctly aggressive rebranding of the more than 200-year-old foreign policy position. Beyond reasserting the sovereignty of the western hemisphere against foreign intervention, the document centers on energy and strategic assets, and attempts to redraw the map of the geopolitical landscape more broadly. It is clear that Trump no longer sees the western hemisphere as a peaceful backyard, but rather as the frontier of a new Cold War. In particular,
The last foreign delegation Nicolas Maduro met before he went to bed Friday night (January 2) was led by China’s top Latin America diplomat. “I had a pleasant meeting with Qiu Xiaoqi (邱小琪), Special Envoy of President Xi Jinping (習近平),” Venezuela’s soon-to-be ex-president tweeted on Telegram, “and we reaffirmed our commitment to the strategic relationship that is progressing and strengthening in various areas for building a multipolar world of development and peace.” Judging by how minutely the Central Intelligence Agency was monitoring Maduro’s every move on Friday, President Trump himself was certainly aware of Maduro’s felicitations to his Chinese guest. Just
RSS