ECB warns of US payment dominance but data shows mixed picture across Europe

Christine Lagarde, president of the European Central Bank, has sounded an alarm that Europe's digital payments infrastructure is dangerously exposed to decisions made in Washington. In an interview with Irish broadcaster NewsTalk, she said the continent must "reduce vulnerabilities that arise from the current payment platform's infrastructure being foreign-owned" and ensure a "European offer available, just in case." The warning carries weight: Europeans are enthusiastic adopters of cashless payments, with cards accounting for 56% of all cashless transactions in the first half of 2024, according to ECB data, amounting to more than 40 billion transactions.

Dependence varies sharply across the single market

The aggregate figure masks a striking divergence. Ireland and the Netherlands are effectively wholly dependent on Visa and Mastercard for card payments. Germany and France, by contrast, have retained domestic schemes that command overwhelming market share. Germany's Girocard, formerly the EC card, holds more than 70% of the domestic card market, while French national systems account for nearly 80% of card transactions. The difference is not accidental. Both countries invested in national interbank networks decades ago, and both resisted the consolidation that saw other European schemes sold to US operators.

That history matters. When the ECB publishes figures on card usage, it is measuring volume at the point of sale. What those figures do not capture is the value moving through the system, nor the business-to-business flows that dwarf consumer spending. Hugo Godschalk, a payments consultant with four decades of experience and managing director of Frankfurt-based PaySys, argues that the dominance narrative collapses once you widen the lens. "You really can't speak of dominance in that case," he said, estimating that less than 1% of total European payment value, including B2B, traverses US card networks.

The consultant's counter-argument

Godschalk's scepticism extends to the ECB's claim that national systems cannot handle cross-border payments. He concedes that physical point-of-sale transactions abroad often require an international network, but insists online commerce within Europe already routes through domestic rails. The distinction is more than academic. If the vulnerability is confined to tourists tapping cards in foreign shops, the strategic risk is narrower than the ECB's language implies. If, however, the concern is about the plumbing that settles trillions in commercial obligations, the data Godschalk cites suggests Europe already controls its own arteries.

The ECB does not dispute the domestic strength of Girocard or the French Cartes Bancaires. Its concern is structural: a single market that fragments at the payment layer cannot claim strategic autonomy. Philip Lane, the bank's chief economist, put it in geopolitical terms at a conference in Cork this March. He described a "global shift towards a more multipolar monetary system, with payments systems and currencies increasingly wielded as instruments of geopolitical influence." The dependence, he warned, "exposes Europe to risks of economic pressure and coercion and has implications for our strategic autonomy, limiting our ability to control critical aspects of our financial infrastructure."

Mobile wallets shift the battlefield

While the debate over card rails continues, the consumer interface is moving elsewhere. Apple Pay, Google Pay and PayPal now lead the mobile payment market in Europe. Lane said app-based payments already account for nearly 10% of all retail transactions, with annual growth rates in double digits. The card networks are not absent from this layer, Visa and Mastercard tokens sit inside many of those wallets, but the customer relationship, the data and the authentication are increasingly controlled by US technology platforms. That is a different kind of dependence, and one that domestic card schemes do not automatically solve.

Russia's stress test offers a template

The scenario Lagarde describes as a thought experiment has already played out. After Russia invaded Ukraine in 2022, Visa, Mastercard, American Express and PayPal ceased operations in the country. But President Vladimir Putin had prepared. Years earlier, he mandated that authorisation, clearing and settlement of domestic Visa and Mastercard transactions must occur within Russia, handled by Russian processors. When the US networks pulled out, Russian-issued cards continued to function, inside Russia. Godschalk suggests a similar mandate could serve as a temporary European shield: requiring intra-European card payments to clear on European infrastructure would make it harder for US firms to disrupt transactions within the EU. He estimates the necessary regulation would take two to three years to enact.

Digital euro and Wero: the homegrown contenders

Europe's institutional response has two prongs. The digital euro, a central bank digital currency under development since 2021, received a draft legislative framework from the European Commission in June 2023. The European Parliament has yet to approve it. Key questions remain unresolved: whether all banks must offer digital euro accounts, whether merchants must accept them, and how to prevent disintermediation of commercial banks. The banking sector has shown little enthusiasm, fearing loss of deposits and fee income. Consumers, Godschalk noted, have not been given a compelling reason to switch.

The second effort is commercial. The European Payments Initiative (EPI), launched in 2020 and backed by a consortium of European banks and payment service providers, unveiled its Wero system in July 2024. Wero allows peer-to-peer and merchant payments using a phone number or email address instead of a 22-digit IBAN, mimicking the convenience of PayPal. Some German banks have integrated it into their mobile apps. The early adoption data is discouraging: a Verivox survey of 1,000 Germans in October 2024 found nearly 90% had never heard of Wero.

Why previous European card projects failed

The graveyard of European card ambitions is well populated. Monnet, Eurocard, and various national schemes either folded or were acquired, often by the very US firms they were meant to rival. Godschalk attributes the failure to simple economics: cross-border transaction volumes within Europe have historically been too small to justify the investment in a pan-European network. Banks in Germany and France, comfortable behind their domestic moats, saw little return in building a competitor to Visa and Mastercard for the fraction of payments that cross borders. The irony, he notes, is that several of those domestic systems were eventually sold to US acquirers.