Europe and the UK Race to Break Free From US Payment Giants
For years, the call for the European Union to develop its own alternative to US payment behemoths Visa and Mastercard has grown louder. Now, with Donald Trump’s return to the White House, that call is turning into urgent action. The UK appears to be following suit, recognizing the vulnerabilities of relying on American-controlled financial infrastructure.
The Looming Threat of US Control
Currently, Visa and Mastercard dominate the payment card landscape. According to Aurore Lalucq, president of the European Parliament’s economic and monetary affairs committee, the US could, in an extreme scenario, force these companies to disable their networks in Europe. The consequences would be immediate, leaving millions unable to complete even basic transactions.
This isn’t a hypothetical concern. Similar disruptions occurred in Russia following the war, and in August 2024, five judges at the International Criminal Court had their credit cards blocked after issuing an arrest warrant for Benjamin Netanyahu, a move sanctioned by Trump prohibiting US companies from providing them services, including Visa and Mastercard.
A Two-Pronged Approach: Europe’s Digital Euro and the UK’s Private Initiative
While Europe is developing the digital euro, the UK is forging ahead with a privately-funded solution. Tomorrow, UK bank leaders will meet to lay the groundwork for a new, UK-made payment company designed to bolster the British economy against potential disruptions from overseas systems.
The UK is heavily reliant on Visa and Mastercard, with approximately 95% of transactions processed through their systems. Without them, the UK could be thrown back to a cash-only economy, according to reports.
However, You’ll see key differences between the digital euro project and the UK’s initiative. The digital euro is spearheaded by the European Central Bank, while the UK project is driven by private investment from banks like Santander, NatWest, and Lloyds.
A Surprising Twist: Visa and Mastercard Join the UK Effort
Perhaps the most surprising development is the involvement of Visa and Mastercard themselves. Both companies are contributing financially to the UK’s new payment system, stating their goal is to “provide consumers and businesses with access to innovative and secure digital payments with the highest levels of resilience.” This could be a strategic move to ensure they aren’t excluded from the future of payments.
According to data from 2023, Visa and Mastercard collectively processed over EUR 7 trillion in transactions across Europe, and account for 56% of all cashless transactions in the EU. Together, Visa and Mastercard process approximately $24 trillion in transactions annually.
The Broader Implications for Financial Sovereignty
ECB President Christine Lagarde has repeatedly emphasized the need for Europe to regain control over its digital payments, warning that consumer data leaves European jurisdiction with every transaction processed through US networks. This push for financial sovereignty is driven by concerns over data privacy, security, and the potential for geopolitical leverage.
The European Payments Initiative (EPI) and the EuroPA Alliance have already signed an agreement to build a pan-European interoperable payment network, utilizing the digital wallet Wero, aiming to facilitate cross-border payments without relying on American networks.
FAQ
Q: Why is Europe trying to break away from Visa and Mastercard?
A: Concerns over data privacy, security, and the potential for geopolitical leverage are driving the push for financial sovereignty.
Q: What is the digital euro?
A: A digital form of the euro being developed by the European Central Bank.
Q: What is the UK’s plan?
A: A privately-funded initiative to create a new, UK-based payment system.
Q: Are Visa and Mastercard involved in the UK’s plan?
A: Yes, they are contributing financially to the new payment system.
Did you recognize? In Germany, the Girocard holds over 70% of the market share, demonstrating a stronger reliance on domestic payment systems compared to some other EU countries.
Pro Tip: Keep an eye on the development of the EPI and Wero wallet, as they represent a significant step towards a more independent European payment landscape.
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