Since has returned to power, Europe has been concerned about its reliance on the United States, and how it could potentially . One such area under scrutiny is digital payments.
The president of the , Christine Lagarde, has said she is alarmed.
Lagarde told independent Irish radio broadcaster, NewsTalk, recently that Europe would need to “reduce vulnerabilities that arise from the current payment platform’s infrastructure being foreign-owned” and make sure there is a “European offer available — just in case.”
For her, it is “important to keep digital payments under our control.”
Different levels of dependency across the EU
Europeans are ardent users of cashless payments, with 56% of all cashless transactions in the first half of 2024 being made by card, according to ECB data. That’s more than 40 billion transactions.
But the extent of reliance on US card networks like Visa and Mastercard varies significantly across EU member states.
Some countries, like Ireland and the Netherlands, are completely dependent on Visa and Mastercard, the ECB data show. Others, such as Germany and France, have their own domestic card systems and are therefore less reliant on US firms.
In Germany, the Girocard — formerly known as EC card — holds over 70% of the market share, while in France, national payment systems account for nearly 80%.
How serious is the problem?
One expert offering a more skeptical view is Hugo Godschalk, a payments consultant with four decades of experience in the finance industry. He told DW that if you look at total European payment traffic — including business-to-business transactions — less than 1% in terms of value flows through US systems.
“You really can’t speak of dominance in that case,” said Godschalk, who is managing director of PaySys, which is a payments systems consultancy based in Frankfurt, Germany.
He also challenges the ECB’s claim that national systems don’t work for cross-border payments. That might be true for purchases at physical stores abroad, he said, but not for online shopping within Europe.
Rise of app-based payments
Europe’s vulnerability doesn’t end with card payments. Increasingly, consumers are paying with smartphones via apps, where American tech firms like , , and PayPal lead the market.
These app-based payments already account for nearly 10% of all retail transactions, ECB Chief Economist Philip Lane told an audience during a conference in Cork, Ireland, this March, and annual growth rates there are in 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 would seek to assert their independence from “foreign monetary powers,” he said.
“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 model work for Europe?
What remains a thought experiment in Europe has already become reality in Russia. After the in 2022, Visa, Mastercard, American Express, and PayPal all ceased operations in Russia. But President had prepared for such a scenario.
“He had already mandated years earlier that processing of domestic Visa and Mastercard transactions must take place within Russia,” said Godschalk. That means authorization, clearing, and settlement are all handled by Russian processors.
As a result, Russians could continue using their domestically issued Visa and Mastercard cards — but only within the country.
This approach could also serve as a temporary solution for Europe, Godschalk suggests as it would allow intra-European card payments to bypass Visa and Mastercard networks, making it harder for US companies to disrupt transactions within the EU.
But implementing such a system is no quick fix. Introducing EU-wide regulation or legislation to that effect would take at least two to three years, Godschalk added.
Waiting for the ‘digital euro’
Godschalk believes the ECB’s warnings about payment dependencies are partly a strategy to promote the idea of a so-called — a central bank-issued currency that, like cash, carries no credit risk.
By contrast, the money in bank accounts is created by commercial banks and is theoretically less secure. If a bank fails, the money could vanish — although deposit insurance typically protects customers from such losses.
The ECB has been working on the digital euro project since 2021. , but the European Parliament has yet to approve it.
Key questions remain unanswered, such as whether all banks will be required to offer digital euro accounts, and whether merchants must accept them. As a result, the launch of the digital euro remains uncertain and could take years.
So far, the banking sector has shown little enthusiasm, fearing it would lose parts of its business. And consumers haven’t been given compelling reasons to switch to a new system, Godschalk noted.
Wero: A European payment system in its infancy
A project launched in 2020 and called European Payments Initiative (EPI) is also working on a homegrown alternative to US payment systems. It brings together European banks and payment service providers from several countries.
The initiative’s new payments system is called Wero and was launched in July 2024. Some German banks already support mobile payments via Wero. Unlike traditional wire transfers, Wero doesn’t require a 22-digit IBAN. Instead, users can send money using a mobile phone number or email address — similar to how PayPal works.
The problem? Hardly anyone has heard of it. A survey conducted in October 2024 by German price-comparison portal Verivox found that nearly 90% of 1,000 respondents in Germany said they didn’t know what Wero is.
And what about a European credit card network?
That raises the question of why Europe hasn’t been able to built its own credit card network to rival the American giants.
Godschalk noted that several attempts have been made to establish a European card system, but interest notably in major countries like Germany and France has been low, primarily because cross-border transaction volumes are relatively small.
In the end, most of the domestic systems were sold — ironically, to US companies.
This article was originally written in German.
The post Can Europe wean itself off US credit card firms? appeared first on Deutsche Welle.
