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Seven of the EU’s national finance ministries have published a joint statement in support of the European Payments Initiative (EPI).
The EPI is EU’s latest attempt at creating a single pan-European payments system, operated by European payments providers, which can rival the likes of Visa and Mastercard’s dominance of person-to-merchant payments.
Now seven of the EU’s finance ministries have “re-iterated” their support for the initiative, stating that: “We firmly believe that the time has come to build a genuine Europe of payments.”
“We, therefore, look forward to a successful formal launch of the project,” the ministerial statement says, continuing to advocate that the EPI will bring the greatest benefit if it has a Union-wide reach, encouraging the EPI to further work on the involvement of more member states and their banking and payment communities to join the initiative.
Last year it received endorsements from the European Central Bank and the European Commission, with the latter having praised the prospect in its Retail Payments Strategy, while Competition Commissioner Margrethe Vestager has also talked up its prospects.
All talk but no action
In spring, a senior official at Sweden’s Riksbank gave the P27, the project which aims to create a pan-Nordic payments system, a dressing down, stating that it needs more action and less talk, warning that although it has resulted in a lot of momentum, that has not meant progress.
Perhaps the same could be said with the EPI.
Of course, nobody ever said that the EPI would be an easy project for the EU’s already cash-strapped banks and payments institutions to pursue.
At the time of its inception in 2020, even those cheerleading the initiative also urged caution over the scale of the commitment.
“Such a reorganisation of the European payments landscape undoubtedly requires significant investment, at a time when the resources of banks are scarce and when priority is rightly given to recovery,” Burkhard Balz, member of the executive board of the Deutsche Bundesbank, and Sylvie Goulard, deputy governor of the Banque de France, said in a joint statement.
In February, Martina Weimert, its interim chief executive, asked for a regulatory pause so that members could concentrate on getting the project off the ground.
During the summer, Joachim Schmalzl, its chairperson, said that it remains to be seen whether the EPI will even take off, although he was keen to also express his optimism.
But some EU-based sources are beginning to express doubts about progress.
"From what I have seen, or haven't seen, not much has happened since June. However, Weimert is liking posts on LinkedIn about EU banks needing to agree on a structure for the framework,” said a Paris-based source that is close to the project, noting that the project is stuck in governance issues, which they complained is "a traditional pitfall in the EU".
"This is not a project that can work without strong leadership, and perhaps Weimert needs to consider her position considering the lack of progress,” the source added.
Meanwhile, a Brussels-based source told VIXIO that although German and French banks are pushing for it, the Spanish and the Dutch are more tentative. “There are frictions between the different banks.”
The source even suggested that it could end up being the case that the project simply simmers out, before dissolving once a new college of European commissioners is established after the EU parliamentary elections in 2024.
Yet, that does not take away from the sheer level of political pressure for this to work.
“As payments and payment data have become strategically and economically significant, action is more than ever needed,” the finance ministers statement cautions.
Almost all of the EU’s big legislative agenda for payments has a focus on sovereignty, whether that is the reining in of bigtech companies through the Digital Markets Act, the European Central Bank’s work on a digital euro, the European Commission’s push for instant payments to become the “new normal”, as well as the heavy-handed regulation of stablecoins via the Markets in Crypto-Assets framework. The EPI fits firmly within this agenda.
For the Paris-based source, it is a pity that the EPI may not work out. “If we don't have a strong, EU-grown system then we could lose that to others through the boom in platforms like DeFi [decentralised finance], which could end up being the future of payments. This is complicated for the EPI,” they said.
"We don't know how much has been invested so far, and that is a big part of what the final product will look like, for example, who can use it,” they continued. “This is a crisis moment, and it can die or be born. Yet, the EPI is nowhere to be seen in the media, so we can see it might be going nowhere."
The EPI’s journey so far
In 2016, Europe lost its only European card payment system when Visa Europe was acquired by Visa Inc.
This followed a failed attempt at establishing an EU payments system earlier in the decade when the Monnet Project launched in 2010 before being wound down in 2013.
Yet in July 2020, a group of 16 major European banks from five EU member states — Belgium, France, Germany, the Netherlands and Spain — announced their support and development programmes for the EPI.
These banks included BBVA, BNP Paribas, Deutsche Bank, ING, Banco Santander, Société Générale and UniCredit.
It has since expanded, with the accession of two of Europe's leading payments processors, Worldline and NETS, as well as banks from Finland and Poland, and a collective of 12 Spanish credit institutions.
Although the EPI is currently closed to new members, Weimert did say in February that by the end of the year, it would be possible for new companies to come on board.
At the time, she even stated that the company was in talks with the Chinese market about global expansion and possible cooperation agreements.
Global expansion is a worthwhile goal; however, many commentators that VIXIO has spoken to about this issue have said that the investments and action needed to focus on Europe first.
