Europe's $24T Breakup with Visa and Mastercard Has Begun
Europe is launching Wero, a pan-European payment system, aiming to break its dependence on American giants Visa and Mastercard due to data sovereignty and geopolitical risk. This ambitious initiative seeks to unify fragmented national systems and overcome past failures by connecting 130 million users across 13 countries. Hacker News discusses the significant technical, regulatory, and political challenges this presents, alongside the potential for genuine economic sovereignty.
The Lowdown
The European Central Bank (ECB) and a consortium of European banks are pushing for a new pan-European digital payment system, Wero, to reduce the continent's reliance on American payment processors like Visa and Mastercard. ECB President Christine Lagarde has highlighted concerns over data sovereignty, noting that virtually all European card transactions send consumer data to the United States. Geopolitical vulnerabilities, underscored by Russia's experience with payment network cutoffs, further fuel this drive for strategic autonomy.
- Wero, launched by the European Payments Initiative (EPI) in July 2024, is built on SEPA instant credit transfers, allowing users to send money via phone number. It already boasts over 47 million registered users and has processed more than €7.5 billion, with retail payments live in Germany and soon expanding to France and Belgium.
- A significant milestone occurred when EPI signed a memorandum of understanding with the EuroPA Alliance, connecting national payment systems like Italy's Bancomat and Spain's Bizum, thereby expanding Wero's reach to approximately 130 million users across 13 countries.
- Previous attempts at a unified European payment system, such as the Monnet Project, failed due to fragmentation among national solutions and the powerful network effects of Visa and Mastercard.
- Running in parallel is the ECB's digital euro project, a public-sector initiative designed to complement Wero's private-sector efforts, both aiming for payments sovereignty.
- Skeptics point to the immense investment required (billions of euros), low profitability due to EU interchange fee caps, and deeply entrenched consumer habits as major hurdles for Wero's success.
Despite the formidable challenges and a history of failed attempts, the current strong political will for European strategic autonomy, coupled with regulatory support, suggests Wero might have the necessary momentum to finally establish a viable alternative to the Visa/Mastercard duopoly.
The Gossip
Moats, Monopolies, and Modernization
Commenters debate whether Visa and Mastercard's market dominance is due to their inherent complexity in solving problems like fraud and global interoperability, or if it's primarily maintained by protected moats and network effects. Many argue the underlying technology isn't 'rocket science' but rather a system reinforced by regulations and market power. Some believe the EU's strong regulatory capacity could be the necessary lever to challenge this established order.
European Endeavors: Past, Present, and Political
The discussion highlights Europe's repeated failures in creating a unified payment system, attributing them to fragmentation and competing national interests. However, a strong sentiment emerges that the current geopolitical climate, particularly concerns about US influence and a desire for strategic autonomy, provides a new impetus for Wero. Comparisons are drawn to Russia's successful implementation of its Mir system as an example of what can be achieved with sufficient political will.
Wero's Workings: Features and Foibles
Users scrutinize the practical implementation and perceived limitations of Wero. Concerns include its reliance on smartphone apps, lack of web browser support, and limited integration with all banks, leading to questions about its user-friendliness. While some express skepticism about its ability to replace traditional cards, others reference successful national instant payment systems, like India's UPI or various European mobile pay apps, as proof that a card-less, phone-centric system can gain traction.
Fees, Freedom, and Financials
A significant portion of the discussion revolves around the financial implications of current payment systems, specifically the interchange fees merchants pay to foreign entities. Commenters discuss the actual percentage of these fees and how EU regulations capping them might affect the profitability and viability of new European systems. The underlying desire for economic sovereignty and reducing the 'sales tax' to non-European companies is a recurring theme.
Global Gripes and Travel Tribulations
The vital importance of global acceptance for any payment system is a key concern among users, many of whom share frustrating experiences with non-Visa/Mastercard options (like Discover) while traveling abroad. There's apprehension about whether a new European system can achieve the widespread international usability of the incumbents or if it will primarily remain an intra-European solution, leaving international travelers dependent on existing global networks.