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Can a new European Payments Initiative succeed?

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6 Mins.

In order to succeed, the European Payments Initiative must overcome fragmentation, compete with established and emerging players, and persuade people it is needed. Despite the challenges of entering a crowded market, the EPI has huge potential to create a unified, end-to-end payment ecosystem in Europe

In July 2020, a consortium of European banks launched the European Payments Initiative (EPI) in a bid to create a unified payment solution for consumers and merchants across Europe. The EPI is looking to solve a problem that other initiatives have failed to solve before – the lack of a pan-European offering to rival established players such as Mastercard and Visa; emerging digital providers, including Apple Pay, PayPal, and Stripe; and the consolidated regulatory networks found in the United States or China. Seven countries are currently on board with the EPI: Germany, France, Belgium, the Netherlands, Finland, Spain, and, interestingly, Poland, a non-euro-currency country.

European banks have historically pursued national schemes. But such schemes have been on the decline as banks hitch their card offerings to providers with a global payment infrastructure. There is now a vision and a desire to make a homegrown, pan-European payment solution work. A poll carried out by G+D and Netcetera during a live webinar found that half of 100 industry experts believe the EPI will primarily strengthen the European payment industry to compete against other regions, such as North America. Many also believe it will lower costs for both banks and consumers.

Infographic showing poll results showing the main expectations of the EPI

From national to regional

The desire to create a pan-European solution has been around since the euro was created. In 1999, the man in charge of the Internal Market and Taxation at the European Commission, Frits Bolkestein, said, “The Commission's political objective is … a modern Single Payment Area for the entire EU where there is no frontier effect for cross-border payments.”1 Over the intervening 22 years, the Single Euro Payments Area (SEPA) has been established to facilitate credit transfers and direct debits across borders. Card payments, however, have yet to benefit to the same extent. There are currently 13 national card systems across Europe, highlighting the fragmentation in the sector.

The EPI aims to provide end-to-end solutions that cover all use cases – it plans to offer a unified card and digital wallet that can be used for person-to-person (P2P) payments, instant payments, in-store and online payments, as well as cash withdrawals across Europe. Such consolidation puts end consumers at the forefront, by reducing payment complexity and vastly increasing convenience. Rather than dealing with multiple passwords, apps, or authentication methods, consumers would have a unified and widespread payment solution that covers all card and digital offerings. This would simplify travel and enrollment procedures, while maintaining a high level of security. The EPI could also be developed in parallel with Central Bank Digital Currencies (CBDC) and a European identity scheme to enhance user experience and freedom of payment choice.

Infographic showing the products and use cases of the EPI

Facilitating cross-border payments

The EPI aims for strong standardization and cooperation between countries to enable Europe to become a dominant player in the world market. The European Central Bank welcomes the EPI as it is an effective way to strengthen the autonomy of the European retail payments market. Merchants will be interested in the fees that will be levied and the ease of integration it facilitates. Kurt Schmid, Marketing and Innovation Director of Secure Digital Payments at Netcetera, says, “The idea behind this is to enable cross-border payments beyond the European borders of national states. Payments could either go through EPI processors or routers, or both. Countries should have the flexibility to choose. Instant payments can then be used as a foundation for settlement.”

Infographic showing the functional principles of the EPI

Implementation challenges

EPI CEO Martina Weimert told Finanz Szene that there must be a widespread European solution. “We need an all-encompassing solution with a consistent and unique appearance,” she says.2 She predicts that it will take around two years to set up the EPI, but it will be three to five years until the EPI is in use among the masses. Migrating domestic schemes toward an EPI and developing new network infrastructure – apps, platforms, e-commerce solutions, cards, and compatibility with point-of-sale (POS) devices – will require billions of euros in investments. Building new routers to authorize inter-banking processes is also a major undertaking. In addition, the EPI must set up and manage a common set of rules and technical standards, the business model it intends to pursue, and legal and risk-management procedures.

“This would be a game-changer by revolutionizing the way we interact and pay and bringing innovation to different industries“
Dr. Carsten Wengel
Head of Sales & Distribution, Card & Digital Payments, G+D

Arguably, one of its biggest challenge is to convince merchants and consumers that an EPI is needed at all. Weimert believes that to instill trust in consumers, they must see and experience the added value for themselves. Dr. Carsten Wengel, Head of Sales and Distribution at G+D’s Card and Digital Payments business, is confident that the European Payments Initiative will offer benefits to all parties involved.

“The EPI should support and complement all forms of new digital payments, including the e-Euro and e-IDs,” he says. “This would be a game-changer by revolutionizing the way we interact and pay and bringing innovation to different industries. It is not a question of technology, it’s a question of political will and the financial services sector in Europe taking a leadership position.”

  1. “Opening speech round table on retail payments,” European Commission, 2000

  2. “Das ist der Masterplan für die EPI,” Finanz Szene, 2021 (available in German only)

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