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Europe and Russia moving to build alternative to Visa and Mastercard


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For veterans of the payment industry, it is beginning to be “Déjà vu” all over again. In the early days of Visa and Mastercard, back in the seventies, there were ongoing payment wars between the two U.S.-based card associations and banks in Europe, which preferred their home-grown services, dubbed EuroCheque and Europay at the time, after several branding changes. Europeans argued that every time a Visa or Mastercard was used in Europe, a cash register rang in the United States. It was the populism equivalent of today’s politics, fifty years ago, but the “wars” are now back.

The quote being heard from EU officials is:

There are clear signs that Europe is at risk of losing its economic edge.

In line with such thinking, the European Central Bank (ECB), in concert with 20-unnamed French and German banks, is proposing to fast-track a plan to build an alternative payment network to rival both Visa and Mastercard. The project already has a name – the Pan European Payment System Initiative (PEPSI).

According to reports from CBRonline, Benoît Cœuré, an ECB executive board member, stated at a speaking engagement in Brussels that he “wants to see a strong commitment from the proponents of the new initiative, and a clear roadmap…so that we can see tangible actions emerge soon.”

He went on to add:

Dependence on non-European global players creates a risk that the European payments market will not be fit to support our Single Market and single currency, making it more susceptible to external disruption such as cyber threats, and that service providers with global market power will not necessarily act in the best interest of European stakeholders.

Coincidentally, Russian government officials are moving in similar directions, but for different reasons. After Russia’s intrusion into the Crimean peninsula and global sanctions were instituted, the major card associations blocked the use of payment cards in the Crimea. Russia had to replace the network with its MIR payment system. Russian lawmakers are now considering new legislation, designed to “to break the dominance of US payments providers”.

From an historical perspective, it appears that developments over the past few decades have now come full circle. The original European payment organizations eventually aligned with Mastercard, which acquired the entities well before its successful IPO in 2006. Visa’s IPO followed in 2008, but its European division chose to be separate. The parent company did not exercise its option to buy it until years later, consummating the final merger in 2016. In the course of just three years, populism has returned.

Cœuré’s “call to arms” in Brussels is available online, but his concluding comments are succinct and to the point:

In this environment, there are clear signs that Europe is at risk of losing its economic edge. Country-specific solutions lack the necessary size and scale, and national fragmentation has paralysed competition and stifled innovation on the pan-European level. In the worst-case scenario, this may endanger the autonomy of European payment systems.

He then concluded: “The vision of an industry-led, pan-European retail payment solution is therefore at the heart of the Eurosystem’s retail payment strategy that I have outlined this morning. A pan-European strategy that facilitates instant, secure and inexpensive payments – both online and in brick and mortar stores – has the potential to make up lost ground and meet the rising needs of consumers for efficient cross-border payments. Better affordability, quality and choice will also promote financial inclusion.”

These same benefits were used as arguments for the evolution that has taken place over the last fifty years, but it seems that old ideas of populism never die. They appear to recycle again and again through the course of time, “Déjà vu”, as it were.

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Europe and Russia moving to build alternative to Visa and Mastercard

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