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Bundesbank exec calls for EU rival to Big Tech payment platforms

Bundesbank exec calls for EU rival to Big Tech payment platforms

A senior executive at Deutsche Bundesbank has called on the banking sector to develop a pan-European mobile payments platform capable of competing with systems from Big Tech giants from the US and China.

The comments come from an interview with Bundesbank board member Burkhard Balz, first published in Handelsblatt and reprinted on the central bank's main Website.

Quizzed on the idea of a European solution, Balz says: "Here in Europe, we need to prevent a situation from arising in which American and Chinese payment systems are all we have left to choose between. Highly successful firms from the United States and China are looking to carve out a huge chunk of the European market. Hence the desire to forge a payments solution with a clear-cut European 'brand'.

"Chinese and US players are also saying that a race is under way here in Europe in which market domination is probably up for grabs. If you ask me, Europe needs to get off the sidelines and take a stance."

In order to achieve this, Balz says the core EU makets of Germany, France, Spain and Italy need to come together and begin work on establishing a pan-European platform.

Similar noises have emerged from the European Central Bank in the payment cards market, which is dominated by US schemes Mastercard and Visa. The ECB has long-floated the idea of a home-grown cross-border scheme capable of taking on the big brands, but so far without success.

"Of course there are cases where the results have fallen short of expectations," says Balz. "But I’m talking about defining our final destination. Take a look at how credit card providers have increased their share of Europe’s payments market, and you’ll see a strong increase in concentration. Do we want to sit back and just let that continue? Or wouldn’t it be better to at least try to forge initiatives of our own in response?"

Balz is wary of the efforts of US big tech firms like Apple and Google, and Chinese behemoths such as Alibaba and TenCent, moving to establish their own systems as the dominant platforms throughout the world.

"They have every right to make that attempt," he says. "But equally, we in Europe have every right to create our own brand. We shouldn't just be a spectator in a market that’s as important as this. It would make sense for European players to pool their resources as a way of competing eye to eye with global rivals. Our role to begin with will be that of a moderator."

Comments: (2)

A Finextra member
A Finextra member 17 April, 2019, 08:19Be the first to give this comment the thumbs up 0 likes

The two US based card schemes emerged as cooperatives with also European member/owners on-board sixty years ago. They ended up being US public companies since the EU competition authority labelled the EU bank ownership as a cartel and the EU bansk sold first Europay and then Visa. In the US the authorities have been more supportive and the global schemes have been able to invest in and market their global customer proposition which is also appreciated by EU consumers and merchants since we do move outside the EU from time to time.In China the closed market allowed their dominant providers to gain big scale without much "foreign" competition and now they expand also to Europe where they are "welcomed" by the overseers. In the EU the authorities and overseers have been active to create obstacles and rules to destroy the business case for the EU payment business and in general politicians are bad-mouthing the existing well working payment services.  The IFR, Psd2  and its SCA-rts, PAD, GDPR, Euro x-border payment regulation and its 2019 add-ons are exaamples of the EU priorities. The DG Comp investigations in among others the EPCattempts for the Sepa mobile payments framework, have kept the payment servicing industry interest low since no payment service can be built without competing banks cooperation. Banks have been busy implementing these regulatory demands instead of focusing on bigger things like a new European payment scheme. With the existing regulatory framework the business model needed for a new payment scheme is made difficult and any investment pay-back uncertain. Thereby the lock-in situation in existing "US" payment services is created by the EU itself. 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 17 April, 2019, 12:35Be the first to give this comment the thumbs up 0 likes

@FinextraMember + 1. 

During the last decade or two, the greatest buzz we've heard in retail payments in EU has been around EMV, Chip-and-PIN, Account Switching, Open Banking, PSD2, SCA, and so on. With so much focus on things that are arguably solutions looking for problems, core products - like EBA myBank - that could have possibly made some dent on the onslaught on EU markets by leaders from USA and China have understandably fallen by the wayside. 

My $0.02: EU regulators should carry out some serious soul-searching to find out why their repeated attempts to whip up local products have remained daydreams.

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