Don’t imitate – innovate! Why Europe doesn’t need a rival to Visa and Mastercard

The European authorities want a home-grown challenger to Visa and Mastercard. They should instead encourage European banks to support more diverse payment options.

Europeans are becoming more reliant on two US giants – Visa and Mastercard – to make payments. The European Commission and the European Central Bank (ECB) are frustrated at this situation. They see American dominance as a threat to the EU’s ability to regulate payments in a way that reflects European choices. For example, the EU was impotent when Visa and Mastercard refused to process donations to Wikileaks in 2011, following US political pressure. Nor does the dominance of US payment giants in Europe help the international standing of the euro.

To achieve ‘payments sovereignty’, the Commission and the ECB are pressuring European banks to create a new European card network, to compete with Visa and Mastercard. This reflects the EU’s all-too-common approach to strategic autonomy, which aims to replicate foreign successes rather than to innovate. The payments plan is similar to other plans to onshore semiconductor manufacturing and to create a cloud computing solution that would compete with US giants. But ‘European champions’ cannot be viable competing against businesses that enjoy global economies of scale, unless the European solution is innovative. The problem is most apparent in fast-moving technology sectors: by the time European stakeholders get behind a ‘champion’, the market will have moved on. The Commission’s hopes for a European card network illustrate these problems.

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