Card payments in Europe – current context and future prospects
MIP OnLine – 2019
March 4, 2019
Most people view payment cards as a quick and easy way to make retail payments. They are the most widely used and fastest growing electronic payment tool in Europe, accounting for more than half of all cashless transactions of European citizens and businesses in 2017.
To support the move towards the Single Euro Payments Area (SEPA) for cards, the ECB has issued a new report on the European card market titled “Card payments in Europe – current context and future prospects: a European System perspective”.
SEPA for cards – missing elements
SEPA is an EU initiative aimed at creating an integrated market for euro payments. Its ultimate goal is to remove the distinction between national and cross-border payments in euros within the EU so that all payments are considered domestic.
Operating for more than a decade, SEPA has benefited European citizens and businesses by unifying direct credit and debit transfers across 36 European countries. However, as the SEPA for cards has not yet been finalized, cardholders and merchants have not yet fully benefited from the single EU market.
National and international card programs
Cards are ubiquitous, but their use varies widely in European countries, and cross-border card payment transaction rates remain relatively low in total volume. This shows great growth potential in the use of cards, both within many individual countries and across European borders.
Number of card payments per citizen (2014-2017)
Source: ECB Statistical Data Warehouse.
Note: The chart shows card payments by card issued by payment providers residing in the European Union, except for cards that only have electronic functions.
Although new legislation and significant technological advances have actually reshaped the card payment environment, they have so far not led to a harmonized, competitive and innovative European card payment area. The national card market is still fragmented. Although European cardholders can generally use their country cards at any terminal in Europe, the acceptance of cards issued under the nationwide card system throughout Europe is entirely dependent on co-signing with international card payment schemes, namely MasterCard and Visa. Increasingly, payment providers only issue cards from international card programs. In addition, the steady decline in the number of national card programs (from 22 in 2013 to 17 in 2018) means that international card programs are dominating the national market along with the European cross-border card market.
Number of active national card schemes in each Member State in 2013 and 2018
Note: Member States with no national programmes in 2013 or 2018 are not included in the chart.
According to Figure 3, at the end of 2016, the proportion of transactions made using international card programs on payment cards issued in the EU was 67.5%. Such an agreement raises questions about market efficiency in terms of cost, competition and governance, as European payment service providers have little or no influence on market developments.
Number of transactions made with national in the EU (in billions)
Source: Report under the card program for monitoring purposes to the ECB.
Payment innovation as a viable way
Past attempts to establish a European card scheme or to achieve cross-border coverage across Europe of national card schemes have yielded no results so far. However, the implementation of the European instant payment program and the development of a common or interoperable instant payment infrastructure may bring new opportunities. The new instant payment infrastructure can help ensure the interoperability of national card programs. If guaranteed pan-European coverage is ensured, the use of this infrastructure could be an alternative to setting up a European card program. To promote the use of such country tags, it would be useful to have a common European symbol indicating that they can be used in other EU Member States.
Furthermore, the report notes that advanced technologies will increase competition in the card market and give consumers more choice. In addition, European Union legislation (Exchange Fee Regulations and the revised Payment Services Directive) are intended to support a harmonized, competitive and innovative card market. The Eurosystem welcomes the implementation of a clear regulatory framework and encourages innovative solutions that enable efficient, convenient and secure card payments.
allowing a pan-European reach, even if initially targeting national environments;
avoid further fragmentation of the card market.
The Eurosystem strongly supports deeper cooperation and dialogue between relevant market participants, especially between incumbents and new entrants. Creativity and stan