Pan-EU Payments Challenger Lacks Consumer and Merchant Demand

Although Europe lacks a pan-regional scheme to rival international card networks, building and igniting one means giving consumers and merchants a reason to get on board — something that is lacking today, says Gijs Boudewijn, general manager at the Dutch Payments Association.

“There is hardly any demand, especially not from consumers. They can get a card from their bank which works well all the time, everywhere. So why will they need anything else?,” Boudewijn argued.

It’s a goal the European Payments Initiative (EPI) has been trying to achieve with a  pan-European payment system to rival major international card networks like Mastercard and Visa, and ultimately replace national European payment schemes such as France’s Carte Bancaire and Germany’s Girocard.

But even though some retailers believe that international credit card fees may be too high, Boudewijn said the thesis that an European solution could hold the promise of lower fees for merchants has yet to be proven.

“For it to be successful, it needs to be better and cheaper than what you already have today. If not, why on earth would merchants accept those payments otherwise? They will not do it only for idealistic or geopolitical reasons,” he told PYMNTS in an interview.

Then there’s the deeply fragmented European landscape, which he referred to as “the beauty of Europe but also the beast of Europe.” That challenge, he noted, has also hindered the efforts of the several pan-European initiatives like the digital euro and building of interoperability between European Mobile Payment Systems Association (EMPSA) members, leading to suboptimal results so far.

“It might make sense in a certain jurisdiction but won’t make sense in another jurisdiction,” he noted further, adding “There’s never a right moment that everyone is at the same crossroads at a single point in time.”

Building an Inclusive Digital Agenda

When it comes to the digital euro, Boudewijn said determining a clear unified use case has yet to materialize because of the different stages of advancement in digitalization as well as differences in payment needs and preferences from one market to another.

For instance, he pointed to the digital-savvy Dutch market, which has its own account-based eCommerce payment system in iDEAL and hardly uses cash, as one where the European central bank digital currency (CBDC) will have little use.

“The dilemma for the euro system is that in order for European citizens to use it, it needs to be an attractive product, so it needs to go beyond the use cases for banknotes today … in order not to disrupt the market,” he explained.

Overall, he said issues around fragmentation, the differences in culture, the different stages of development of the payments infrastructure, sunk cost and legacy systems, will all have to be tackled head on to see any tangible progress.

In the meantime, he said developing an inclusive digital agenda will remain a key focus in the region to ensure that all consumers are benefiting from advancements in payments technology.

“It’s not just about getting more and more digital. We need to rethink that approach or else people who cannot keep up with the pace of change are going to be left behind,” he said.

In fact, Boudewijn pointed to a recent report from the Dutch Central Bank which shows that one in six Dutch consumers cannot fully independently perform their own basic digital banking services and need help to do so, signaling an important gap that still needs to be filled in the payment landscape, especially for consumers who are still heavily reliant on cash.

“Cash is on the way out, but there will still be a need for it. So, in my country now, the burning [issues] are how to improve accessibility and keep cash available,” he said.

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