It has been an interesting few years for the European Payments Initiative (EPI). The alliance launched in 2020 to great fanfare, vowing to offer an instant payments service in Europe and challenge a couple of behemoths, U.S. card networks Visa and Mastercard.
The launch, in July 2020, was initially joined by 16 major European banks from Belgium, France, Germany, the Netherlands, and Spain, with the ranks eventually swelling to 31 major banks. EPI envisioned offering a card to European consumers and merchants, as well as a digital wallet and peer-to-peer (P2P) payments.
In November of that year, EPI announced third-party acquirers Worldline and Nets as shareholders of the EPI Interim Company. EPI seemed poised to make a strong run at its ambition of creating “a truly European digital payment solution, carefully designed for the business needs of the 21st century,” as voiced by Gilles Grapinet, the Chairman and CEO of Worldline, in a news release heralding the move.
Then came the stumble: 20 banks pulled out of the effort last year, prompting EPI to scale back its ideas for a card challenger to Visa and Mastercard.
At the time, a brief statement on the EPI site said the group was “now adapting its scope and objectives to this new dimension.”
News this week brought clarity to the alliance’s new direction.
More Partners, With a Focus on Wallets
EPI is acquiring Dutch payments method Currence iDEAL and Payconiq International, a payment solutions provider with headquarters in Luxembourg. PQI services iDEAL’s efforts.
EPI said it has also added Belfius, DZ Bank, ABN Amro, and Rabobank to its group of existing backers.
The plans to challenge Visa and Mastercard have gone by the wayside, replaced by a plan to develop a digital wallet to facilitate instant account-to-account payments across Europe. The pilot phase of that effort is expected to commence by the end of this year in France and Germany, with a wider launch to follow in 2024.
The Big Card Networks: Vulnerable but Also Mighty
A recent Javelin Strategy & Research report by analyst Matthew Gaughan, The Case for Card Networks’ Embrace of Interoperability, provides some insight into why challengers might be increasingly eager to take on payments titans like Mastercard and Visa.
New payment methods are continually coming online, and regulators have shown rising aggressiveness toward the card networks. Those factors have put the interchange model under increasing stress.
But beating the likes of Visa and Mastercard remains a daunting task, Gaughan said.
“Focusing solely on account-to-account payments may be EPI’s Achilles’ heel, at least in the short term,” he said. “Card issuers—banks—would lose out on a considerable amount of interchange revenue if EPI’s digital wallet gained wider adoption, and that could explain the departure of 20 banks from the original effort.”
Gaughan contrasted that with what’s happening in the United States.
“Early Warning’s recently announced digital wallet is taking a different approach here,” he said. “The bank consortium’s product would still support the millions of cards customers held across each bank—preserving their interchange revenue, and card networks’ place in the market. For now.”