For two years, some of Europe’s banks have touted the idea of establishing a new pan-European debit card scheme to challenge Visa’s V Pay and MasterCard’s Maestro, but despite intermittent activity (and the backing of the European Central Bank) nothing concrete has emerged.
The proposed scheme, known as ‘Monnet’, is one of several ideas that have been touted by European banks and payment players as they explore ways to break the stronghold that Visa and MasterCard have in Europe.
But so far, the establishment of such schemes has been stalled by confusion over what form they would take: whether they would be developed and implemented completely from scratch, or whether they would leapfrog on the back of existing ATM and debit network infrastructure across Europe.
The ongoing uncertainty over the issue of interchange in Europe has also, so far, helped to stall any further development. Currently, of the three proposed schemes to have emerged – Monnet, PayFair and the Euro Alliance of Payment Schemes (EAPS) – only the latter has managed to establish a tangible presence by building on existing technical infrastructures.
EAPS is based on links between six domestic card schemes from Germany, Italy, Spain, Portugal, the UK and interbank network EUFISERV, and envisages that cards of the issuers involved will be accepted at all of the terminals of participating card acquirers.
PayFair is a private initiative comprising a merchant-orientated debit card scheme but has not gained any significant traction or interest.
French and German banks forge alliance
However, Hermann-Josef Lamberti, COO of Deutsche Bank, is again talking up the prospect of a third pan-European debit scheme, telling a conference in Frankfurt that several financial institutions, including Société Générale and BNP Paribas, are planning to formally establish a group of banks by October 2009 to move ahead with the Monnet scheme.
Although at this point Monnet remains only a concept, according to Lamberti, the scheme will begin to gain momentum and “evolve into a solid European system” once the rest of the European banking sector sees that the major German and French banks have committed themselves to its establishment.
Hans Georg Fabritius, a board member of Germany’s Bundesbank, told the same conference that while a Visa and MasterCard duopoly is “an unsatisfying vision” for economic and political reasons, Monnet needs to be put into action sooner rather than later and have as much pan-European backing as possible if it is ever to become more than just a concept.
The aim is to have banks from 31 European countries join the new scheme.
A viable threat?
But the success of Monnet may be dependent on the strength of its participating banks given the systemic shocks occurring in Europe’s banking industry over the past couple of years, which led many banks to the brink of collapse.
It would appear that getting hold of the investment needed to implement the massive ATM and POS terminal infrastructure, sign up merchants to the scheme and roll out payment routing and processing capabilities needed to rival Visa and MasterCard may be the obstacles that could see Monnet stuck firmly on the drawing board.
Just how viable Monnet is has caused considerable debate between payment industry experts.
Gwenn Bézard, research director at US payment consultancy Aite Group, is very much of the view that the incumbent payment networks need to sit up and take the threat seriously.
“The fact that Visa Europe is owned by European banks is clearly not enough, as regulators and some banks continue to push for something strictly native to Europe,” Bézard said.
“If German and French banks seriously line up behind such a project, and consolidate their existing debit networks under such an entity, such a venture will have a great chance for success.
“Regardless of what direction some banks will take with this, Aite Group believes there will be more room for competition for Visa in Europe, not less, because the national barriers to competition will fall and the rules will be pan-European, with a strong anti-trust stand from the European Commission.
“Regulators will not allow for a new monopoly to emerge, even if it is a native European one,” Bézard added.