Who Controls Payments in Europe? Not Us. Let’s Fix That.

Did you know? In 2023 alone, Visa and Mastercard collectively processed over €7 trillion in payments across Europe. In the UK, these two American card schemes handle 95% of all card payments. It’s clear that whenever a European consumer swipes or taps a card, there’s a high chance an American network is behind it. How did Europe, home to some of the world’s oldest banks, come to depend on two U.S. card networks for the lion’s share of its payments? And more importantly, why does it matter now?

Let’s dive into the history, business strategy, and regulatory turns that led Visa and Mastercard to dominate Europe’s payments ecosystem – and explore why European regulators and businesses are now rallying for change.

A Brief History: From California to the Continent

It all started in the late 1960s. Bank of America’s BankAmericard (the precursor to Visa) and the Interbank Card Association’s Master Charge (the precursor to Mastercard) were pioneering credit cards in the US. Their international expansion began quickly: Barclays in the UK launched the first European credit card, Barclaycard, in 1966 as a BankAmericard licensee. By 1976, BankAmericard had morphed into the global Visa brand, with Barclaycard and other European banks as founding members.

Meanwhile, Mastercard’s forerunner made inroads via partnerships. Europe had its own early card ventures – for example, Eurocard launched in 1964 in Sweden – but in 1968 Eurocard struck a deal to join forces with Master Charge. This alliance meant Eurocard holders could use their cards on Master Charge’s growing network and vice versa, effectively bringing Mastercard into Europe’s market. In the UK, a consortium of banks introduced the Access card in 1972 as an alternative to Barclaycard, which later aligned with Mastercard’s network. By the end of the 1970s, Visa and Mastercard (as we now know them) were firmly planted in European soil, offering something domestic bank groups couldn’t match: a card that worked across borders.

Throughout the 1980s and 1990s, these card schemes rode the wave of Europe’s economic integration. As European consumers traveled more and the European Single Market took shape, the value of having a card accepted internationally grew. Local card systems remained fragmented by country – France had Carte Bleue/Carte Bancaire, Germany had girocard (formerly EC card), Italy had Bancomat, Denmark had Dankort, and so on. But these were mainly useful within their home country. Visa and Mastercard offered global acceptance. A Visa card issued in Spain worked in Germany or the US; a Mastercard from France could be used in London or Singapore. For European banks and consumers, that was a game-changer.

Key turning point: In 2002, Europe adopted the euro, simplifying cross-border commerce in the Eurozone. Yet, while bank transfers became easier under the Single Euro Payments Area (SEPA), card payments still weren’t unified under any single European scheme. Instead, Visa and Mastercard seized the opportunity – becoming the de facto pan-European card networks. By the mid-2000s, most national debit card systems (e.g. Switch in the UK, PIN in the Netherlands) had either been overtaken or at least co-branded with Visa/Mastercard (like Maestro or V-Pay on debit cards) to ensure broader acceptance. European banks found it simpler to partner with the big two than to coordinate a continent-wide alternative.

Another major milestone came in 2016, when Visa Inc. (a U.S. corporation) acquired Visa Europe – a consortium which had been owned by European banks – bringing it under full American control. This move underscored the new reality: Europe’s card rails were effectively run by two U.S.-based multinationals. European regulators had approved the deal, focusing more on short-term efficiencies than on the long-term strategic dependence it might create.

Network Effects and the Power of the Platform

Why couldn’t a European challenger catch up? The answer lies in powerful network effects and business dynamics that created a long-term lock-in:

• Two-Sided Network Effects: Visa and Mastercard operate classic two-sided platforms – connecting issuers (banks offering cards to consumers) and acquirers (banks or processors signing up merchants to accept cards). The more merchants accepted the card, the more consumers wanted that card, and vice versa. This created a self-reinforcing cycle that a new entrant could hardly crack. Merchants in Europe accept Visa/Mastercard because virtually all their customers carry them; consumers carry them because nearly every merchant (from big chains to corner shops) accepts them. Any new card scheme faces the chicken-and-egg problem – why carry a card that few merchants accept, or why accept a card that few customers carry?

• Interchange Fee Incentives: A critical (if controversial) factor in growth was the interchange fee – a small fee merchants’ banks pay to cardholders’ banks per transaction. In the early days (and up until mid-2010s), these fees were relatively high. That made issuing Visa or Mastercard credit/debit cards lucrative for European banks, since every time a customer used the card, the bank earned fee revenue. High interchange fees effectively subsidized rewards programs, marketing, and the expansion of card issuance. This strategy helped the U.S. networks gain favor with banks across Europe. (By contrast, any new European scheme would have struggled to offer similar incentives once regulations later capped interchange fees – more on that shortly.)
• Brand Trust and Consumer Adoption: Over decades, Visa and Mastercard built globally recognized brands. European consumers came to trust that familiar blue, white, and gold Visa logo or the red and yellow Mastercard circles. Cards became status symbols and convenience tools. By the 2000s, carrying a Visa/Mastercard was almost a given for middle-class Europeans, whether as a credit card or a bank-issued debit card. Competing with that brand ubiquity required enormous marketing – one more advantage for the incumbents.
• Merchant Acceptance & Friction: For merchants, accepting cards involves some setup (card terminals, contracts with acquirers, paying fees). By the time European retailers were investing massively in card acceptance (especially with the roll-out of chip-and-PIN security in the 2000s), Visa and Mastercard had set the standards. Terminals and point-of-sale systems were all built around these schemes. Introducing a new card network means convincing merchants to incur additional setup or integration costs – a tough sell when Visa/MC already cover almost all customers. In short, merchants had little incentive to push an alternative unless it significantly cut fees or brought in new customers.
• Acquirer Consolidation: On the business side, the companies that process card payments for merchants (acquirers and payment processors) have been consolidating across Europe. Giants like Fiserv or Global Payments now handle huge volumes for multiple countries. These processors are deeply integrated with Visa and Mastercard systems and benefit from their scale. Consolidation means fewer decision-makers to champion a new scheme. The big acquirers are often global players themselves – they are unlikely to promote a local European card scheme that isn’t already demanded at scale. This consolidation thus reinforced the status quo, making the barriers to entry for any new network even higher.

All these factors gave Visa and Mastercard a massive head start. By weaving themselves into the fabric of Europe’s banking and retail infrastructure, they created high switching costs. Banks were locked in (few dared drop Visa/MC products and risk customer attrition), and consumers and merchants had little reason to seek alternatives as long as the system “just worked.”

Regulatory Turns: SEPA, PSD2, and Interchange Caps

Ironically, while European regulators eventually woke up to the dominance of these card schemes, some early regulatory decisions unintentionally helped cement that dominance:

• Lack of a “SEPA for Cards”: The Single Euro Payments Area (SEPA) initiative in the 2000s harmonized bank transfers and direct debits across Europe, but cards were a missing piece. There were attempts to create a SEPA Cards Framework to encourage a pan-European card scheme, but no single network was agreed upon. This regulatory gap meant that as Europe unified its currency and banking rules, Visa and Mastercard became the default pan-European card networks by default. Domestic schemes stayed domestic, and the U.S. networks benefited from the openness without facing a strong regional competitor.

• Antitrust and Interchange Fee Regulation: Starting in the 2000s, the European Commission scrutinized Visa and Mastercard’s interchange fees. For a while, regulators allowed the schemes to set multilaterally agreed fees (viewing it as a way to expand card usage). But by late 2000s, pressure mounted to cap fees seen as anti-competitive. The EU’s Interchange Fee Regulation in 2015 capped consumer debit card interchange at 0.2% and credit cards at 0.3% of transaction value. Good news for merchants in terms of cost – however, this also removed a tool that any new European scheme might have used to lure banks (they could no longer dangle higher fees to issuers as incentive). In fact, the failure of the Monnet Project – a 2010s attempt by major EU banks to create a new card scheme – was partly blamed on regulators not allowing a sustainable interchange model for it. Translation: banks didn’t see how a new scheme could make money under those fee caps, and without regulatory support, they pulled the plug in 2012.
• Payment Services Directive 2 (PSD2): Implemented in 2018, PSD2 was Europe’s bold move to shake up the status quo. It mandated banks to open up APIs for open banking, enabling licensed fintechs to initiate payments directly from bank accounts (so-called “account-to-account” payments). The vision was to foster new payment methods that might circumvent the card networks (think paying straight from your bank to a merchant, without Visa in between). While this has spurred innovation – from instant bank transfer apps to services like iDEAL in the Netherlands – adoption has been gradual. In fact, even by 2022, only about 2% of digital consumers in big markets (France, Spain, Italy, Germany) were regularly using open banking payments in e-commerce. In other words, PSD2 opened the door, but behavioral change takes time. Meanwhile, cards remain the go-to method for over half of non-cash payments in the EU.
• Regulatory Arbitrage and Gaps: Visa and Mastercard have skillfully navigated differing rules across jurisdictions. A recent example: after Brexit, transactions between the UK and EU were no longer under the EU interchange cap. Mastercard promptly increased its interchange fees fivefold on UK-EU online transactions, a move estimated to cost businesses and consumers millions. This kind of action highlighted how much leverage the card duopoly has – and it set off alarm bells in Brussels and London. European merchants saw it as a stark reminder that relying on foreign payment networks can lead to sudden cost hikes if regulatory oversight lapses. (Regulators like the UK Payment Systems Regulator have since scrutinized such fee increases, but the incident remains a case study in regulatory arbitrage – exploiting the cracks between systems).

In short, European policymakers have been playing catch-up: first trying to rein in the costs of the duopoly (with fee caps and antitrust cases), then trying to promote alternatives (like PSD2’s open banking). Yet, the fundamental market structure – a highly concentrated card network market – has not been cracked.

The Cost of Dominance: Dependence and Consequences

By the 2020s, Visa and Mastercard’s grip on Europe’s card payments looked almost unshakeable. Depending on how you measure it, they account for anywhere from 65% of all card payments in the euro area to over 90% of card transactions by value if you consider only international card brands. (The remainder is mostly local debit card transactions on domestic networks like Carte Bancaire or girocard, which, importantly, often still piggyback on Visa/MC for cross-border use.)

This near-duopoly has several implications:

• High Fees and Pricing Power: With limited competition, both schemes have been able to steadily increase certain fees. In fact, Visa and Mastercard have raised various European fees 25% above inflation since 2017. These include the fees they charge merchants’ banks (and ultimately passed to merchants) for processing payments. Such price hikes often go unnoticed by consumers (you don’t see it directly), but retailers certainly notice – and often pass costs back through higher prices. The duopoly’s pricing power was further evident when Visa and Mastercard’s profit margins kept climbing. Visa’s operating margin, for example, exceeds 60% – an astonishing figure that reflects the profitability of their role as toll collectors on Europe’s commerce. For context, few industries consistently see margins that high.

• Innovation Bottleneck: While Visa/MC have innovated (bringing in contactless payments, tokenization for security, etc.), critics say market concentration can slow the pace of innovation. Smaller European fintechs often have no choice but to build on top of Visa/MC (issuing cards, or using card rails for mobile wallets), meaning the core infrastructure hasn’t faced disruptive competition. Some new payment ideas (like real-time account-based payments or mobile payment apps) struggle to gain scale because the incumbent card network is so convenient and entrenched. Essentially, the duopoly can influence which payment technologies get widespread adoption – sometimes in ways that protect their turf.
• Merchant and Consumer Choice: European merchants have little negotiating leverage when both major card options come with similar fees. A retailer can’t realistically drop accepting Mastercard or Visa – they would lose too many sales. This dependence has led merchant associations in Europe to loudly complain to regulators. For example, pan-European retail groups have urged crackdowns on scheme fees and more transparency. Some large merchants even surcharged or threatened to block certain card types to pressure for fee reductions (though EU rules now limit surcharging on consumer cards). Overall, limited competition can mean higher costs that ultimately trickle down to consumers or squeeze merchant margins.
• Data and Sovereignty Concerns: In an era when data is gold, having Europe’s transaction data flowing through foreign-controlled networks raises strategic questions. European regulators and central bankers have noted that critical financial infrastructure is not under European control. If political or trade tensions rise, could Europe’s economy be vulnerable? While Visa and Mastercard are private companies (and argue they are global tech firms, not just American), the fact remains their headquarters and a lot of governance are in the U.S. This strategic dependence doesn’t sit well with policymakers tasked with financial stability. As one ECB official put it, such dependence “exposes Europe to risks of economic pressure and coercion” and limits Europe’s autonomy over its financial infrastructure.
• The Upside: Let’s be fair – European consumers and businesses have also benefited from Visa/Mastercard’s ubiquity. It enabled the digital payments revolution, reduced reliance on cash, and provided unified standards (EMV chips, etc.) that improved security and convenience continent-wide. The networks invest in fraud prevention and have decades of expertise. Any alternative system would need to match the reliability and convenience that Europeans have come to take for granted. This is a high bar. So Europe’s debate isn’t about demonizing the card giants; it’s about balancing the convenience they bring with the costs and risks of over-reliance.

Why Europe Now Wants Its Own Payments Champion

The calls for a unified, competitive European payment scheme have never been louder than today. European regulators, central bankers, and a coalition of major banks are championing efforts to break the duopoly for both economic and geopolitical reasons. Why is this urgency peaking now?

• Strategic Autonomy: In a world of growing geopolitical uncertainty, the EU is prioritizing “digital sovereignty.” The European Central Bank has underscored the urgent need to reduce dependence on foreign payment systems like Visa, Mastercard (as well as U.S. Big Tech payment platforms and China’s Alipay). The concern is that Europe shouldn’t be at the mercy of external decisions if, say, trade disputes worsen or if foreign companies decide to pull out or enforce policies contrary to European interests. A homegrown payments network keeps Europe in control of its commerce rails, protects transaction data under EU privacy laws, and ensures fees and profits circulate within the European economy.
• The European Payments Initiative (EPI): Recognizing past failures, a consortium European financial institutions launched EPI in 2020 to finally create a pan-European payments solution. EPI is now moving forward with a unified digital wallet called “Wero.” As of April 2025, the Wero wallet has over 40 million enrolled customers (gathered in less than 12 months since official go live) and is rolling out person-to-person payments in multiple countries. Later in 2025 and 2026, it aims to support e-commerce, in-store payments, and more across France, Germany, Belgium, the Netherlands, and beyond. The goal is ambitious: one solution for instant payments, accepted by merchants across Europe, under a single European brand. Will it succeed? It’s the most serious attempt yet, backed by major banks like BNP Paribas who declare “sovereignty in payments is a European necessity”. The EPI initiative acknowledges it must cooperate with existing local schemes and cannot simply mandate a single brand overnight.
• Digital Euro & Future Tech: The ECB is also exploring a digital euro (a central bank digital currency), which could provide an alternative means of digital payment outside the card networks. While a digital euro is primarily aimed at complementing cash, not replacing card payments overnight, officials explicitly mention questions like “Why don’t we have a European Visa or Mastercard?” in the context of such projects. The digital euro could enable wallet payments person-to-person or in stores without going through Visa/MC rails, thus bypassing traditional card fees. It’s another piece of the strategy to diversify Europe’s payment options.
• Pressure on Big Tech: Adding to the mix, Apple Pay, Google Pay, PayPal and others are also gaining ground in European payments. These are yet another form of reliance on mostly U.S.-based firms. Although they often sit on top of the card networks, Big Tech’s growing influence has pushed Europe to consider regulatory measures (e.g. the EU’s Digital Markets Act aims to ensure such digital wallets don’t unfairly dominate). All of this reinforces the feeling that Europe needs its own competitive platforms, not just to take on Visa/Mastercard, but also to avoid being sidelined by Silicon Valley or Chinese fintech giants.
• Catalyst: COVID-19 and the Digital Boom: The pandemic accelerated Europe’s shift to cashless payments. Card and digital payments surged even in traditionally cash-loving countries. This brought fees and dependencies into sharp focus. When nearly all commerce relies on digital payments, having only two major card networks becomes a single point of potential failure or exploitation. The post-pandemic world is more digital, and European businesses and regulators see now as the moment to ensure the infrastructure behind that digital economy isn’t a potential weakness.

Why this matters now more than ever: If Europe succeeds in building a competitive payment scheme, it could increase competition, drive down fees, and spur innovation in payments. It’s not about eliminating Visa and Mastercard – it’s about not being 100% dependent on them. A robust European alternative would mean greater resilience: if one network has an outage or policy issue, transactions can route through another. It could mean cost savings for merchants that can then be passed to consumers. And it would keep Europe in step with other regions that have their own schemes (for instance, China has UnionPay, India has RuPay – both grew with government support to reduce reliance on foreign cards).

The Road Ahead: A Call to Action for European Payments

Europe stands at a crossroads in payments. After decades of convenience powered by American card networks, there is a window of opportunity to shape a more independent future. But it will require collective will and collaboration on an unprecedented scale. Regulators must continue to foster a level playing field – for example, by ensuring that dominant networks cannot stifle new ones (vigilantly watching for anti-competitive practices or “lock-in” contracts that tie up banks and merchants). Banks and fintech innovators across EU countries will need to put aside old rivalries and pool resources behind common solutions rather than parochial national systems. Merchants and consumers, too, have a role: being willing to try new payment solutions and give feedback, so that alternatives can refine and grow.

The challenges are real: low margins (due to interchange caps) make the business case tough, and habits don’t change overnight. But the cost of inaction is higher. As one European leader quipped, “We should ask why we don’t have a European Visa or Mastercard” – because if not now, when? The longer Europe waits, the more entrenched global tech and card duopolies become, and the harder it will be to catch up in the race for payments innovation.

Call to action: It’s time for European policymakers, banks, and businesses to double down on building a truly unified European payment network. Support the initiatives like EPI and embrace instant payment infrastructures. Educate consumers on the value of a European solution (security, privacy, and potential cost benefits). Encourage competition not for its own sake but to future-proof Europe’s economy. The dominance of Visa and Mastercard in Europe was decades in the making – undoing the over-reliance will also be a long game, but one worth playing.

The bottom line: European payments need not be a forever duopoly. The history of how we got here offers lessons in the power of networks and missed opportunities. Now, armed with those lessons, Europe has a chance to write the next chapter – one where innovation and competition replace complacency, and where a digital wallet that’s “Made in Europe” can stand shoulder to shoulder with the American giants. The journey to payments sovereignty starts now – and every stakeholder in the ecosystem has a role in making it happen.

Let’s seize the moment.

Feel free to comment or reach out to me directly with any questions. Please note that this article expresses my personal opinion and is not sponsored by anyone. It does not necessarily represent the view of my employer.