When Germany’s Bundesbank convened an online banking and payments conference at the end of 2020, it featured a big-hitting line-up from Europe’s economic and financial policy-making elite. Two issues dominated the discussions: the launch of a digital euro and the autonomy of the EU’s retail payments systems. Across both topics, references to sovereignty, autonomy and strategic choices punctuated the speeches of leaders ranging from Christine Lagarde, president of the European Central Bank (ECB), to Francois Villeroy de Galhau, governor of the Banque de France. Their message was clear: Europe’s fragmented retail payment landscape, dominated by non-European players, was no longer sustainable in an increasingly digital world.
The challenge facing the EU is real. At present, the single market is characterised by a patchwork of essentially domestic retail payments systems. Although many offer real-time payments, they suffer from a lack of integration across borders. Progress has been made in some domains, including credit transfers and direct debits, but harmonisation in other areas, including card payments, has remained elusive. This means that large, non-European players with the requisite scale, including international card network operators, have filled the gap. Policy-makers view this situation as undermining the cohesion of the single market, but it is also contributing to a sense of geopolitical disquiet.
