A group of 16 European banks is set to launch a new payment system intended to compete with American financial giants Visa (NYSE: V) and Mastercard (NYSE: MA). The system is expected to be fully up and running by 2022 and could revolutionize finances in Europe.
The movement to produce a wholly European payment system has been a goal of European policymakers for some time. The European Central Bank (E.C.B.) had stated last year that the lack of a European payment system and the dependence on foreign companies wasn't supportive of the European single market. Additionally, several European member states still do not accept cards from other members.
The E.C.B. announced the European Payments Initiative (E.P.I.) last week. The E.P.I. is being driven by an alliance of major European banks, including Deutsche Bank (NYSE: DB), Banco Santander (NYSE: SAN), and Intesa Sanpaolo (OTC: ISNPY). The initiative will produce a European competitor to the likes of Visa and Mastercard that will be usable in all E.U. member states. Consumers will be able to use the system similarly to a Visa or Mastercard product, being able to use them for in-store purchases, online purchases, etc.
"The European Payments Initiative will have to tackle the fragmentation in European retail payments and should encompass all euro area countries, and eventually the entire European Union," said E.C.B. Board Member Fabio Panetta. "The foreseen effective implementation and a growing number of participants have the potential to strengthen the role of European providers."
The effort is set to begin in the coming weeks. An interim company is set to be opened in Brussels, which will then lay the groundwork for the project and set goals for future developments. The initiative will remain open for other European service providers through the end of 2020.
The coronavirus pandemic helped drive the sudden push. The mass shutdown of physical storefronts and the prevalence of online shopping outlined a need for a centralized European payment system. Even as some in-person shopping begins again, many shoppers prefer contactless payments as opposed to handling cash, which can become a fomite for the transmission of the coronavirus.