Europe’s Payment Power Struggle: Can Visa and Mastercard Be Displaced?

By Nicholas Larsen, International Banker

Europe’s payment system is entering a new phase in which pertinent questions about market structure, competition and efficiency are increasingly being reframed as questions of financial sovereignty. What was once a discussion about interchange fees and merchant costs has expanded into a broader assessment of how much control Europe retains over the infrastructure that underpins everyday commerce. And at the centre of this system sit Visa and Mastercard.

Together, the two US-based payment networks process the majority of card transactions across the eurozone, with estimates placing their combined share at around two-thirds of total card-payment value. In the United Kingdom, that concentration is even higher, with industry data suggesting that up to 95 percent of card transactions rely on Visa and Mastercard.

This dominance reflects the success of long-running network effects rather than deliberate design. Payment systems strengthen as more consumers, merchants and issuers adopt them. Over time, these adoption cycles become difficult to displace with alternative solutions, particularly once integrations with banking infrastructures, merchant terminals and online checkout systems become standardised.

Europe’s policy response to date has been largely characterised by the absence of a unified alternative, rather than a lack of technological capacity. Domestic systems in countries across Europe are often highly efficient within their national borders, but fragmentation has prevented them from scaling into a single cross-border network. As the European Central Bank (ECB) told the Financial Times in February, private-sector initiatives in the past “have shown the difficulty of scaling”, with a bank spokesperson acknowledging that the actors involved “struggle to align on common standards”.

The suspension of Visa and Mastercard operations in Russia following sanctions in 2022 also demonstrated that access to global payment networks can be restricted in response to geopolitical conflicts. While Europe does not face the same sanction risk, the episode has highlighted that access to global payment systems is not unconditional.

European policymakers have increasingly absorbed this lesson into their assessments of financial resilience. “We want to avoid a situation where Europe is overly dependent on payment systems that are not in our hands,” ECB board member Piero Cipollone warned in February, adding more broadly that “if we lose control of our money, we lose control of our economic destiny”, underscoring how control over payments has become a core sovereignty issue, rather than a purely financial one.

A handful of key initiatives now define Europe’s attempt to reshape its payment architecture. The first is the European Payments Initiative (EPI) and its Wero wallet. Built on SEPA (Single Euro Payments Area) Instant infrastructure, Wero enables real-time account-to-account payments using identifiers such as phone numbers and email addresses instead of card details. Its ambition is to provide a pan-European payment layer that reduces reliance on international card networks while preserving integration with existing banking systems. It is already active in France, Germany, Belgium and the Netherlands, with expansion into merchant payments and e-commerce underway.

“We are highly dependent on international solutions…we don’t have anything cross-border,” said Martina Weimert, the EPI’s chief executive, highlighting the absence of a unified European alternative. “Yes, we have nice national assets like domestic [payment] card schemes…but we don’t have anything cross-border. If we say independence is so crucial, and we all know it’s a timing issue…we need action urgently.”

Another notable response is the development of interoperability between national payment schemes. Systems such as Bizum in Spain, Bancomat in Italy, MB WAY in Portugal and Vipps MobilePay in the Nordics are being linked through the EuroPA (European Payments Alliance) initiative. This approach avoids replacing national systems and instead connects them to a federated cross-border network, with the objective of maintaining domestic strengths while addressing the absence of seamless European interoperability.

And then there’s the digital euro, which would introduce central bank-issued digital money for retail use across the eurozone, functioning alongside cash and commercial-bank deposits. It is designed to ensure that sovereign money remains available in a digital economy increasingly dominated by private infrastructure. Legislative approval remains pending at this stage; full implementation is unlikely before the end of the decade.

Taken together, these initiatives represent a layered strategy rather than a single replacement effort: public infrastructure through the digital euro, private-sector coordination via Wero and cross-border interoperability through linked national systems.

But despite this momentum, structural challenges persist, not least because payment systems require simultaneous adoption across issuers, merchants and consumers. Europe already has much of the underlying infrastructure in place through SEPA Instant and domestic real-time payment systems, but it lacks unified usability at scale.

Visa and Mastercard, in contrast, retain structural advantages because they provide integrated functionality beyond transaction processing. Their networks combine acceptance, fraud prevention, dispute resolution and settlement guarantees into a single global system. As a result, they reduce operational uncertainty for both merchants and consumers in a way that is difficult to replicate through fragmented alternatives.

Established behavioural patterns and transaction-level convenience consistently drive consumer adoption of payment methods. This behavioural inertia strengthens incumbency even when alternatives exist.

The incumbents themselves are evolving in response to these pressures. Visa and Mastercard are increasingly positioned not only as card networks but also as broader payment infrastructure providers. Both firms are expanding into tokenisation, digital identity services, real-time account linking and settlement technologies. They are also investing in stablecoins and blockchain-based capabilities, embedding themselves into emerging digital-asset infrastructure.

This evolution is transforming the competitive landscape, with a clear distinction forming between integrated global payment ecosystems and emerging regional systems that are still scaling. National payment systems remain popular but unevenly integrated, while previous attempts to build pan-European schemes have struggled due to governance complexity and misaligned incentives. This institutional fragmentation remains a core limitation on scaling a single European solution.

With policymakers attempting to reduce dependency on external infrastructure, an inescapable gap persists between policy ambition and structural reality. That said, payment systems function effectively only when they are seamless, universal and frictionless at the point of use. Achieving this across fragmented institutional environments remains decidedly challenging. Instead, the infrastructure used should ideally scale before consumer and merchant behaviours become further entrenched.

At the same time, policymakers continue to frame dependency in increasingly explicit terms, with the rapid disconnection of Russian institutions from Visa and Mastercard systems demonstrating how financial infrastructure can be leveraged in geopolitical contexts. European officials have warned that deep integration can create vulnerabilities, with Mario Draghi (former prime minister of Italy and former European Central Bank president) stating in February that “interdependence, once seen as a source of mutual restraint, became a source of leverage and control”.

Instead of immediate displacement, then, Europe’s response is more focused on achieving gradual reconfiguration. Wero, EuroPA and the digital euro each operate at different levels of the payment stack, collectively forming an alternative architecture intended to reduce systemic dependencies over time.

However, adoption remains the central determinant of success. Payment systems achieve scale only when they become virtually invisible in daily use, which, in turn, requires not only technical capability but also merchant acceptance, consumer familiarity and cross-border consistency. These conditions are difficult to engineer in a disjointed regulatory and institutional environment.

For now, Visa and Mastercard remain deeply embedded in European commerce. Their networks continue to provide the default settlement layer for both domestic and cross-border transactions, while adapting to technological changes through tokenisation and expanded digital-infrastructure services.

Rather than directly replacing these existing, dominant payment systems, Europe is instead attempting to construct a parallel infrastructure that can reduce dependency at the margins while maintaining continuity in core payment functionality. What remains unresolved is whether these parallel systems can scale quickly enough to materially alter the structural balance of power in European payments.

“We have the assets and opportunities to do that ourselves. And if we were to remove the internal barriers that we have set for ourselves in Europe, our economic wealth would increase significantly,” the ECB’s president, Christine Lagarde, has noted. Nonetheless, the outcome depends more on execution, coordination and adoption at scale than it does on capability.

Payments are increasingly treated as strategic infrastructure within European policy frameworks. They now sit alongside energy security, industrial policy and digital sovereignty in broader discussions about economic resilience. This shift has elevated the importance of payment networks beyond financial efficiency into questions of systemic control.