Frankfurt, Paris, Rome The European banks are struggling to build a common European payment system – and in the debate around this, a decision is getting closer. The final decision on whether the banks will implement the European Payment Initiative (EPI) and invest 1.5 billion euros should be made this year.
A meeting of 31 financial institutions involved in the EPI interim company, which according to Handelsblatt information, will take place this Tuesday, could point the way. It is now going into the “critical decision-making phase”, said one participant.
If 85 percent of those involved give the green light, the project would go into implementation, according to financial circles. Otherwise there would be more talks and an additional meeting at the end of November. In November one would be satisfied with an approval of two thirds, it was said. With the possible introduction of the EPI payment system, Europe’s banks want to prevent the market from being left to powerful US companies such as Mastercard or Visa.
So far, however, there have been doubts as to whether enough financial institutions will participate in the project – there are concerns in particular among banks from Spain and the Netherlands. It was now in a negotiation process and saw EPI as a challenge from the start, it was said in financial circles. The central banks act as moderators at the talks, and some politicians are also campaigning because they see EPI as a strategically important project for Europe.
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According to insiders, models are now also being discussed in which EPIs could come with scaled-down functions or fewer participants. However, if only a Franco-German system were to be started, that would drive up the costs for the financial institutions involved.
Savings banks provide 150 million euros
So far, the German savings banks have positioned themselves clearly. They want – provided there is a significant contribution from other banks – to provide around 150 million euros for EPI, as the Handelsblatt recently reported. A total of almost 1.5 billion euros will be required for EPIs by 2026.
The German Savings Banks and Giro Association (DSGV) is confident and assumes that the partners are united in the will to “build an efficient and competitive European champion in payment transactions”. DSGV board member Joachim Schmalzl is chairman of the supervisory board of EPI interim company.
Deutsche Bank is also behind EPI: From a European point of view, it is important to establish an independent European payment system. “Deutsche Bank has therefore joined the EPI-Zwischengesellschaft as a founding member to support this joint effort.” Commerzbank did not comment, nor did the major Dutch bank ING.
French banking circles still believe in the project. The investments are likely to amount to a “very significant contribution”, but the exact amount has not yet been determined. Six French banks – including the major banks Crédit Agricole, BNP Paribas and Société Générale – are involved in the EPI interim company.
It is assumed that the preparations will be completed by the end of November – and among other things the name of the targeted new brand has been clarified, it was said in banking circles.
Unicredit from Italy points out that their German subsidiary Hypo-Vereinsbank is part of the initiative. The Milanese bank said nothing about whether the parent company itself will participate. Experts consider this to be unlikely. So far there is no bank from Italy that wants to participate officially.
It is seen as a problem that the EPI investments are unlikely to pay off for a few years. A longer transition phase is expected.
Even if individual financial institutions do not have to raise as much money as the German savings banks, the expenditures are not a sure-fire success – especially since further funds are likely to be necessary over time. “Every bank has shareholders and has to justify the investments,” it is said in financial circles.
Mastercard is phasing out the Maestro function
The previous EPI plans provide that EPI also enables online payments as well as cell phone-to-cell phone payments and thus also opposes the online payment service PayPal. In addition to a physical payment card that is at least EPI-compatible, there should be a digital wallet – in technical jargon wallet – with digitized payment cards.
The relationship between the banks and Mastercard and Visa is ambivalent. The credit card companies are partners of the banks when it comes to processing purchases by credit card. But at the same time there are dependencies: In several EU countries, national card payments – unlike in Germany – are processed using the Mastercard and Visa systems. The same goes for cross-border payments.
Last week it became known that Mastercard is phasing out the Maestro foreign payment function. Mastercard informed European credit institutions in mid-October that new bank cards with the Maestro function could only be issued until summer 2023.
Maestro is currently used by numerous European financial institutions so that customers can withdraw and pay cash in other countries with their national bank card, in Germany with the Girocard (formerly “EC card”) – at least at those cash registers that accept Maestro payments. National payment systems also run partly via Maestro.
As an alternative, the financial institutions can now make national bank cards in addition to a so-called debit Mastercard – which significantly increases the visibility of Mastercard and should also make it more expensive for the financial institutions. Proponents of EPI cite the abolition of Maestro as evidence that Europe’s financial institutions need their own payment system.
More: Girocard soon without Maestro function: Mastercard expires system for international payments.