Merdihan Ismailov, Vice President of FinTech Applications & Solutions at Sirma, was featured in an article published last month in ManagerBG magazine. In the article, he shared his vision and expert insights on the key trends in payment innovations, discussing the potential for Europe to become less reliant on global payment operators. We are publishing a summary of this material with editorial permission. The full text can be read here.
Geopolitical situation and the need for financial autonomy
In times of international uncertainty, ensuring the independence of essential infrastructures, including payment systems, is crucial for Europe’s security. ECB’s President Christine Lagarde has emphasised the need for a European payments ecosystem to reduce reliance on operators like Visa and PayPal. This aligns with the renewed interest in the Capital Markets Union (CMU), which aims to create a unified capital market in the EU to enhance investment flow and provide better access to finance. An ECB report highlights Europe’s heavy dependence on international card schemes, with only nine countries having national systems and thirteen countries from the euro zone relying entirely on them.
SEPA and A2A payment options
Europe has a robust payment ecosystem and infrastructure, thanks to the Single Euro Payments Area (SEPA), which facilitates account-to-account transactions at both national and pan-European levels. While SEPA is popular among businesses, it has not been practical for everyday payments until recently. Establishing a single European card scheme would be a challenging but achievable endeavour, drawing on the successful example of SEPA. However, implementing this initiative would require significant time and resources.
Challenges to the establishment of a European card scheme
After its launch, the biggest challenge will be competing with international schemes that have been established in the market for several decades and hold long-term contracts with banks and payment institutions. These entities have made significant investments to ensure compliance with both business and technological requirements. Additionally, the intense development over the last decade has transformed the nature of partnerships from traditional card payment services into a diverse range of technology and consulting services. This shift is most evident in the branding strategies of Visa and MasterCard, which now position themselves as fintech companies. As anticipated, this may provide the most recent and viable alternative. Furthermore, as mentioned earlier, Europe is investing heavily in the Single Euro Payments Area (SEPA).
Instant payments and technological innovation
Account-to-account (A2A) credit transfers once had several drawbacks that made them less competitive compared to card payments. They were generally slower, more expensive, and more complicated to execute. Settlement times between accounts at different financial organisations could take days, which is a significant disadvantage in commercial transactions. However, technological advancements, particularly the introduction of instant payments (SCTInst), have transformed the competitive landscape. With SCTInst, funds can reach the recipient within 10 seconds, enhancing the appeal of credit transfers.
In recent years, the European Commission and the European Central Bank (ECB) have taken numerous steps to increase the competitiveness of A2A transactions. In 2019, they eliminated price differences between intra- and pan-European payments. By October 2025, all euro transfers should be processed instantly, and three years later, all Member States will be required to implement this regulation, regardless of their currency.
Open Banking and Pay by Bank
With the entry into force of PSD2, payment institutions authorised to open bank accounts are statutorily required to publish public application programming interfaces (APIs) that can be accessed by specially licensed third-party institutions (TPPs). This ecosystem is known as “Open Banking,” and its combination with A2A transactions, often referred to as “Pay by bank,” is considered the strongest alternative to card schemes. Their potential is evidenced by the fact that both card organisations kept a close eye on their development and purchased TPPs from Europe, making significant investments. Visa acquired Tink ($2.1 billion), and MasterCard invested in token.io and Aiia.
Market initiatives and country examples
Following the recent update to the third version of the PSD, responsibility for finding a solution to this issue has been left entirely to market initiatives, and they have not been slow in coming. Examples include Ideal/Tikkie in the Netherlands, Blik in Poland and other national payment schemes based on digital wallets and A2A payments. These are having a significant impact on their respective markets and have achieved substantial market shares. These have been followed by initiatives that are declared to be pan-European, but which are still regional in nature and evolving rapidly towards a pan-European solution. The EPI digital wallet, Wero, is a collaboration between 16 major banks from the Netherlands, Germany, Belgium, France and other countries. EuroPA is an association of payment operators from Southern Europe and Vipps is developing in the Nordic countries.
Request to Pay and the future of payments
The SEPA Request to Pay (SRTP) service is expected to provide further impetus. It will enable merchants to send payment requests directly to customers’ bank accounts. The institution will forward the request to the customer’s mobile banking, where the customer can approve the payment in a familiar and secure environment. Combined with an instant transaction, the merchant will receive the money in their account in any European bank within another 10 seconds. This will eliminate the disadvantages of card payments and utilise the existing payment infrastructure. The European Commission and the ECB have also taken action to make SRTP mandatory for all payment institutions.
PSD3 and access to payment infrastructure
The introduction of PSD3 is expected to stimulate innovation in the payments market by providing payment institutions and e-money companies, which are not banks, with direct access to the payment infrastructure, thereby removing the requirement for a bank to mediate this connection. This will increase competition and reduce the time taken to introduce new services and products.
The digital euro - the ECB’s digital currency
Many analysts see the digital euro as a viable alternative, though it’s the least established solution. European institutions are assessing its potential impact amid increasing digitalisation. Decentralised funding applications and crypto assets aim to bypass traditional financial intermediaries, with stablecoins offering benefits of both digital and traditional currencies. The digital euro, managed by the ECB, seeks to provide a European payment system and enhance monetary policy while safeguarding sovereignty from competing digital currencies.
Central bankers face challenges in making the digital euro widely accepted, including ensuring accessibility through various formats, balancing cash circulation, protecting user data, and minimising transaction costs. Currently, the digital euro is in the preparatory phase and is expected to advance by October 2025, with a rollout plan and technology provider selection to follow.
Are we in Europe lagging, wondering what approach to take?
The technological solutions are available, but the choice between direct competition, established infrastructure with limited support, and total innovation does not seem easy. However, it should be supported by all stakeholders. My personal expectations and wishes are that Europe will soon find its new Revolut for A2A payments.
