The European card payments market is one of the most critical components of modern commerce, processing billions of transactions every year. Despite its scale, competition remains limited, with Visa and Mastercard maintaining a dominant position that leaves little room for alternative networks. While a competitive payments ecosystem is essential to driving innovation, reducing costs, and expanding consumer choice, Europe has struggled to establish viable alternatives. This has led to mounting concerns over rising fees, limited payment options, and an overreliance on US-based financial infrastructure. In 2023 alone, Visa and Mastercard collectively processed over EUR 7 trillion in transactions across Europe, reinforcing their entrenched market position.
Visa and Mastercard collectively control the vast majority of card transactions in Europe. In the UK alone, they process 95% of all card payments. In 2023, Visa and Mastercard processed a combined total of approximately USD 4.7 trillion in payment volume across Europe. Visa reported a payment volume of USD 2.4 trillion, while Mastercard reported USD 2.3 trillion. It's important to note that these figures include European countries beyond the European Union, as Visa and Mastercard's definitions of Europe encompass a broader region.
According to the European Central Bank, card payments made up 56% of all cashless payments in the EU in 2024, highlighting the dominance of these networks. While countries like France and Germany have invested in domestic alternatives such as Carte Bancaire and Girocard, these schemes are unable to provide competition at a European scale. The lack of integration between national systems further fragments the market, making it difficult for new entrants to establish a unified, cross-border payment solution. As fintech companies and neobanks reshape the financial landscape, they, too, remain dependent on the established card networks for issuing payment cards, further entrenching the dominance of these players.
Efforts to build pan-European payment systems have been unsuccessful in the past, largely due to this fragmentation of the market. Initiatives such as the Monnet Project and PayFair were launched with high hopes but ultimately failed to achieve widespread adoption. Existing national schemes like Giropay and Paydirekt are now being phased out, signalling the difficulty of establishing a unified solution. However, unlike earlier initiatives, the European Payments Initiative (EPI) and its proposed payment brand, Wero, aim to address the fragmented nature of Europe’s payment landscape by offering solutions that work across multiple payment channels – online, in-store, and P2P.
One of the most significant barriers to competition is the high cost of entry into the card payments sector. Creating a viable alternative requires substantial investment in infrastructure, compliance with complex regulations, and the development of consumer trust – an uphill battle against incumbents with decades of experience. For example, the European Payments Initiative (EPI), a consortium of European banks aiming to create a pan-European payment system, has projected that the initiative could require investments of 'several billion euros' to become operational.
The strong network effects that Visa and Mastercard benefit from further reinforce their dominance. Merchants accept their cards because consumers widely use them, and consumers continue using them because they are accepted nearly everywhere. The widespread acceptance of Visa and Mastercard among merchants creates a self-reinforcing cycle, making it challenging for alternative domestic card schemes to gain significant market traction.
Moreover, Europe's fragmented payment systems make it difficult for new players to provide simple cross-border services. Different countries have their own regulations and local networks, creating an additional hurdle for new entrants to navigate. While the EU has pushed for greater integration through initiatives such as the SEPA, card payments remain largely dominated by a few major players.
This lack of competition comes at a price. Merchants have faced steadily increasing card processing fees, with Visa and Mastercard raising rates by at least 25% above inflation since 2017. Following Brexit, Mastercard increased cross-border interchange fees between the UK and EU fivefold, costing businesses and consumers millions in additional expenses.
These price hikes have sparked growing frustration as they do not appear to be justified by a corresponding rise in security investments or technological advancements. Instead, the financial performance of Visa and Mastercard suggests that the additional revenue is primarily driving profit growth rather than innovation. Visa’s operating margin exceeds 60%, with its diluted earnings per share nearly tripling since 2018, while Mastercard has seen similar trends, with profits soaring and margins expanding. Despite these profits, independent fintech firms are leading innovations in real-time payments and digital wallets, rather than the card giants themselves.
With no viable competition, Visa and Mastercard can dictate pricing terms to businesses while offering little in return beyond basic payment processing services. This makes it difficult for merchants to negotiate better deals or explore alternative payment solutions. Furthermore, the lack of competition leaves Europe highly dependent on US-based financial infrastructure, raising concerns over data sovereignty and strategic autonomy.
Despite efforts by European regulators to curb excessive fees and foster competition, progress has been limited. The EU’s 2015 Interchange Fee Regulation capped interchange fees for debit and credit cards, but it did not address the broader issue of rising scheme fees imposed by Visa and Mastercard. Similarly, PSD2 aimed to promote competition by enabling Open Banking, yet its impact on reducing reliance on traditional card networks has been minimal. In key European markets such as France, Spain, Italy, and Germany, only around 2% of digital consumers used Open Banking in 2022, according to PwC estimates, highlighting the slow adoption of alternative payment methods.
In the UK, authorities have begun scrutinising Visa and Mastercard more closely, with the Payment Systems Regulator (PSR) investigating their fee structures and considering new interventions. Trade organisations, including the British Retail Consortium, have called for greater transparency and potential regulatory caps, arguing that merchants have collectively lost hundreds of millions due to unchecked price increases. The European Commission is also investigating whether Visa and Mastercard’s market dominance constitutes an unfair barrier to competition, with potential fines or new regulatory mandates on the horizon.
Regulatory bodies are considering new interventions, such as the Digital Markets Act, which could impose stricter oversight on dominant payment networks and encourage competition. Additionally, the European Central Bank is exploring the potential introduction of a digital euro, which could provide an alternative payment method that bypasses traditional card networks.
Despite these challenges, efforts to introduce greater competition continue. Some fintechs and payment providers are actively working to reduce reliance on card networks by promoting alternative payment methods. Mobile wallets, peer-to-peer payment solutions, and A2A transfers are gaining traction, offering businesses and consumers ways to bypass traditional card infrastructure. Open Banking, which allows payments to be initiated directly from bank accounts, presents another potential solution, with the promise of lower costs and improved transparency.
A2A transfers are on the rise as an alternative to card payments. Companies like TrueLayer and Tink are facilitating these transfers by offering Open Banking APIs that connect directly to bank accounts, enabling businesses and consumers to bypass the card networks. Trustly, which operates across Europe, has been expanding its A2A payment solutions, enabling direct payments between consumers’ bank accounts and merchants. This system is especially appealing for ecommerce, as it reduces processing costs and avoids the high fees associated with card networks.
Open Banking, driven by the EU's PSD2 regulation, is another game-changing initiative that could reshape the payment landscape. By allowing third-party providers to initiate payments directly from consumers' bank accounts, Open Banking eliminates the need for card networks and offers lower fees and greater transparency for merchants. For example, GoCardless facilitates direct bank payments for businesses across Europe, which reduces dependency on Visa and Mastercard. However, despite its promise, consumer and business adoption has been slow. Many users remain hesitant to trust third-party payment providers with their sensitive financial data, and businesses are cautious about switching from more established systems.
The European card market’s reliance on Visa and Mastercard has resulted in a system that prioritises the interests of a few dominant players over those of merchants and consumers. While regulators and industry innovators are working to introduce greater competition, breaking the duopoly remains a challenge. To create a more competitive and resilient payments ecosystem, Europe must pursue a mix of regulatory oversight, support for emerging payment technologies, and investment in domestic alternatives. Only by doing so can the region reduce its reliance on entrenched players and ensure that businesses and consumers benefit from fairer pricing, better security, and genuine innovation in payments.
About Claudia Pincovski
Claudia is a News Lead Editor at The Paypers. Holding a bachelor’s degree in Journalism, she is very passionate about exploring the latest news on financial inclusion, financial literacy, digital banking, and Open Finance. Claudia is a diligent researcher, a meticulous editor, and an active advocate for diversity and inclusion.
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