EU seeks to displace Visa and Mastercard

The European Union is one step closer to adopting a digital euro which policymakers there hope will lessen the euro zone’s dependence on U.S.-based retail payment systems like Visa and Mastercard. The economic committee of the European Parliament last week approved draft rules for the digital euro (essentially a digital wallet) with an eye toward adopting final regulations by year end, piloting in 2027 and full-scale implementation in 2029.

“A digital euro will ensure that Europeans have a European public payment option, based on European technology and European infrastructure, which makes it possible to pay digitally in all situations, online and offline, throughout the euro area,” Piero Cipollone, member of the executive board of the European Central Bank, said in a June 19 speech in Rome.

Cipollone added that the ECB has signed an agreement with three European standards-setting bodies to use their technical standards to support acceptance of digital euro payments online and at physical points of sale.

The digital euro offers Europe “a chance to end a dependence we have lived with for too long,” ECB President Christine Lagarde, said in a June 15 speech in Frankfort. “Europe has no pan-European card scheme of its own, and most of what people tap and swipe runs on networks we do not own. International schemes account for more than 60 percent of card payments, and 13 out of 21euro area countries have no national card scheme.”

Wresting free of U.S. dominance

A recent article in the French news agency Lemonde, illustrates why the ECB and European Parliament are so keen on wresting free of U.S.-based payment processing networks, especially Visa and Mastercard. “These companies have become strategic weapons in the geopolitical struggles between the world’s great powers,” Lemonde reporter Lucie Robequain wrote.

By way of illustration Robequain told of Nicolas Guillou, a French national and a judge at the International Criminal Court. Guillou has not been able to make any payments using Mastercard or Visa cards for the past 10 months. He’s not alone, either. Several other ICC judges are in the same position, having been sanctioned by the U.S. government for issuing arrest warrants for Israeli Prime Minister Benjamin Netanahu and his former defense minister, Yoav Gallant.

Reaching pan European scale

As Legarde explained, European card schemes have failed to reach pan-European scale “because they are caught in a vicious circle: no merchant accepts what few customers use, and no customer uses what few merchants accept. The digital euro breaks that circle. Because of its legal tender status, it must be accepted everywhere.”

“A digital euro will ensure that Europeans have a European public payment option, based on European technology and European infrastructure, which makes it possible to pay digitally in all situations, online and offline, throughout the Euro area,” Cipollone said in his speech. “As legal tender, the digital euro will be accepted by merchants that accept digital payments. This will lead to the creation of a pan-European acceptance network that all European banks and fintech companies will be able to use to offer their own payment solutions without incurring any costs for new infrastructure, and without having to rely on the proprietary standards of international card schemes,” he explained. “As a result, it will be cheaper and easier for private firms to achieve a European scale and extend their reach to e-commerce and in-store payments.”

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