After AI chips and cloud computing, Europeans have woken up to another American dominated technology to worry about –payment systems operated by Visa and Mastercard. France’s Aurore Lalucq, one of the European Parliament’s leading voices on financial services, recently expressed fears that Washington might suddenly “cut off” Europe.” Europe must build an alternative, “an Airbus of payment systems,” she said,
America’s dominance of global payments is not accidental: it grew around private card networks backed by powerful banks and a large and unified domestic market. That model rewarded scale: once US card networks were ubiquitous at home, they easily expanded abroad. Merchants followed tourists, banks followed merchants, and digital wallets followed smartphones. Today, much of the world’s retail commerce runs on US-based infrastructure; the latest European Central Bank data show US cards processed about 61% of euro-area card transactions in 2022.
Although the credit card tussle may not generate headlines like transatlantic fights over AI and cloud computing, it’s important. Payments have evolved from simple plumbing into a complex digital ecosystem. And unlike in AI or cloud computing, Europe’s reliance on American credit cards does not reflect American technological superiority.
The continent is actually ahead in digital finance in facilitating low-cost, instantaneous payments. Over the past decade, it has opened the market to competition from fintechs while strengthening security and consumer protections through reforms such as PSD2 and the instant payments regulation. Now the EU is updating its payments rulebook with new rules to harmonise payment services and strengthen fraud prevention.
The result is one of the world’s most advanced retail banking systems: mobile-first, low-cost, and increasingly instant. More than 400 million Europeans can already move money directly from one bank account to another with Pay by Bank payments that are made directly through trusted banking apps and flow straight to the merchant. No cards, no middlemen, and all in seconds.
What remains missing is adoption. Europe has failed to make Pay by Bank the default way to pay, and that’s what must change. Pay by Bank works smoothly online, but far less so at the physical checkout. Experiences vary widely by country within the European Union. Payment terminals and standards still default to cards. The result is familiar to consumers: everyday purchases still run mainly on non-European schemes, even though Europe already possesses the infrastructure for an effective Europe-wide payment alternative.
The challenge is not building a single European champion. It is finishing what already exists. Europe effectively has a de facto Europe-wide payment infrastructure: interoperable, bank-based, and pan-European. What it lacks is the policy alignment to make the system operate everywhere people pay, especially in shops. The regulatory framework stops short of setting minimum standards to work seamlessly, online and at the physical checkout.
Other countries moved fast in turning instant bank transfers into everyday payments. India did so through the Unified Payments Interface (UPI), which now handles roughly 83% of India’s digital payment volume. Brazil followed with Pix, whose rapid success has drawn claims from Washington that it unfairly disadvantages US credit card companies. In both cases, instant transfers are paired with shared standards that make them easy to use at the checkout, online, and in stores, precisely the environments where US card networks historically dominate.
The UK has taken a pragmatic middle path. It neither sought to replicate US-style private dominance nor stopped at EU-style permissions. Instead, it has treated Pay by Bank as core economic infrastructure, aligning open banking with real-world merchant acceptance rather than leaving it as a legal right on paper. Under its National Payments Vision, the UK is explicitly pushing account-to-account payments toward ubiquity to compete directly with cards and wallets.
For some in Europe’s policy debate, the European Central Bank’s digital euro looks like the solution. That debate is not a substitute for action today. A digital euro will take years to build, test, and deploy, and it will require significant public investment. Pay by Bank already exists, already works, and connects more than 400 million European bank accounts. It is private, scalable, and European.
Europe’s private sector is also testing alternatives. Initiatives such as the European Payments Initiative’s Wero and the EuroPA alliance reflect growing recognition that Europe needs home-grown payment options built through bank and scheme cooperation. Momentum is real, but structural constraints remain. Wero and other bank-led schemes like Wero are shaped by national banking incentives that complicate pan-European scale. The EuroPA alliance relies on voluntary interoperability between domestic systems, with limits in the absence of common standards or enforcement.
The payment industry is changing fast. As autonomous AI agents increasingly make purchasing and payment decisions on behalf of users, the choice of payment rail shifts from people to software defaults. Those defaults are already being designed around US and Asia-based wallets, card networks, and increasingly stablecoins, which are being built for online commerce, cross-border settlement, and programmable payments. If Europe hesitates, these instruments risk becoming the embedded rails of next-generation digital commerce, locking in non-European control.
That makes the near-final Payment Services Regulation the continent’s moment of decision. It can close the remaining gaps and ensure Pay by Bank works just as well in a corner shop as it does online. Or it can leave Europe with world-class banking infrastructure that still relies on imported payment rails.
The US built global payment power by being decisive early and letting scale do the rest. Europe tried to embed payments in a competitive, rules-based market, but hasn’t yet made the system fully usable. That is the real transatlantic divide.
Padraig Nolan is a Fellow with the Tech Policy Program at the Center for European Policy Analysis (CEPA). He serves as Chief Operating Officer of ETPPA, a prominent EU fintech association. His involvement in early-stage EU policy formation has covered critical areas such as open banking and the move to open finance, Central Bank Digital Currencies/ Digital Euro, AI, data protection, anti-money laundering obligations, and instant payments.
Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions expressed on Bandwidth are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
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