The European Commission (EC) has said talks are
currently being held with several major European banks regarding a
new payments card network that could rival Visa and
MasterCard.
According to the Financial Times, Germany’s
Commerzbank and Deutsche Bank alongside French banks Société
Générale and BNP Paribas were preparing to decide on launching a
new card network over the coming months.
“We have had a series of contacts with banks
and other interested parties about payments cards,” said commission
spokesman for competition matters Jonathan Todd. “Members of this
project have approached the commission, but they are not the only
ones.”
The tentative name for the scheme is Monnet –
after Jean Monnet, one of the key architects of the European Union.
The enthusiasm of the German and French banks to go ahead with this
initiative depends on how high the commission would accept
interchange fees to be set, according to the Financial Times.
Should no clear solution be agreed upon by the both banks and
regulators, the banks will in all likelihood continue to use the
existing Visa and MasterCard networks.

Early stages

A spokesperson at Commerzbank confirmed to CI that the talks are
taking place at a high level, but reiterated they were still very
confidential and at a very early stage.

The proposed card scheme is expected to be
based on the same interchange model as the Visa and MasterCard
networks in Europe, but both the EC and the European Central Bank
(ECB) as well as national central banks must approve the proposal
before banks in other European countries can join.
Interest in a pan-European payments scheme has
grown significantly in recent months, as both MasterCard and Visa
have come under increased pressure from the EC regarding the level
of interchange fees charged when processing card payments. Brussels
has always been keen for the implementation of a new payments
scheme to rival MasterCard and Visa, believing this would lower
costs for the consumer.
In December last year, the EC ruled the
multilateral interchange fees charged by MasterCard for
cross-border transactions made with MasterCard and Maestro debit
and credit cards were illegal. The EC has also undertaken a new
investigation into the interchange fees charged by Visa for
cross-border card transactions, following the expiry of a 2002
antitrust agreement between the card company and the EU’s
Competition Commission.
The recent stock exchange listings of
MasterCard and most recently Visa has also given banks a cause for
concern, as they fear the new arrangements and structures of these
institutions will dilute their own bargaining power with
them.
With the introduction of the Single European
Payments Area this year in 31 countries, it is hoped that by 2009
the cost of debit transactions will be uniform across all the
markets in question. Should the major German and French banks in
question get behind a new payments network initiative, it could
quickly gain momentum as these countries alone account for around
30 percent of SEPA transactions.

Challenges

News of the most recent pan-European initiative follows on from
reports last year that a group of Europe’s largest banks –
including Société Générale, Deutsche Bank, Dresdner Bank,
Commerzbank, Unicredito, ABN Amro, ING and Rabobank – were holding
discussions regarding a similar scheme to compete with the current
payments duopoly in Europe.

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Sanjay Sakhrani, an equity analyst at Keefe,
Bruyette & Woods, told CI that the plan, although supported by
Europe’s regulators, may have difficulty getting off the ground due
to infrastructural issues.
“We note that Visa Europe has faced challenges
in developing a product for SEPA and decided to remain
non-for-profit,” Sakhrani said. “MasterCard made the most advances
in developing a compliant product and according to management, it
took it many years to develop such a product, and almost 50 percent
of the cards in the region carry its [or Maestro] brand.
“We think it will be very hard for the banks to
create a compliant product by the stated goal of issuers having a
SEPA-compliant product available by January 2008, and the end of
2010 when there should be no non-SEPA cards in
operation.”